KBRA Assigns AAA Rating to Various Los Angeles Unified School District General Obligation Bonds; Affirms Rating for Parity Bonds
3 Apr 2025 | New York
KBRA assigns a long-term rating of AAA to the Los Angeles Unified School District: Election of 2024, General Obligation Bonds, US Series A (2025) (Dedicated Unlimited Ad Valorem Property Tax Bonds); Election of 2024, General Obligation Bonds, US Series B (2025) Federally Taxable (Dedicated Unlimited Ad Valorem Property Tax Bonds); and, 2025 General Obligation Refunding Bonds, Series A (Dedicated Unlimited Ad Valorem Property Tax Bonds). KBRA additionally affirms the long-term rating of AAA for the District's outstanding General Obligation Bonds. The rating Outlook is Stable.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- A broad, diverse tax base with historically favorable trends in wealth, commercial activity, and property values provides a very strong source of GO debt repayment.
- Per consultation with external counsel, KBRA considers the bondholder protections afforded by the California constitution and state law to be robust.
- The statutory framework for fiscal monitoring and reporting outlined in AB 1200 is a key credit strength for California school districts.
Credit Challenges
- ADA, the basis for state funding, is projected to continue to decline.
- Financial operations are challenged, as evidenced by continued deficit spending, with projections of significantly reduced fund balance through FY 2027.
Rating Sensitivities
For Upgrade
- Not applicable at AAA rating level.
For Downgrade
- Significant tax base decline necessitating a substantial increase in the tax rate required for debt service.
- Reduction in the General Fund balance below the 5% of expenditures policy threshold could pressure the rating.
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