KBRA assigns a long-term rating of A to the Ysleta Independent School District’s, TX (the “District” or “YISD”) Series 2026A Unlimited Tax Refunding Bonds, Series 2026B Unlimited Tax Refunding Bonds, and to parity outstanding unlimited tax general obligations (collectively, the “Unlimited Tax Obligations’). KBRA additionally assigns a long-term rating of A- to the Series 2026 Maintenance Tax Notes (“Limited Tax Obligations”). The rating Outlook is Stable.
Proceeds from the Series 2026A and Series 2026B Unlimited Tax Refunding Bonds will be used to refund a portion of the District’s outstanding parity unlimited tax obligations and pay costs of issuance. Proceeds from the 2026 Maintenance Tax Notes will fund varied maintenance expenses of the District and pay costs of issuance.
The District’s Unlimited Tax Obligations are voter-approved obligations of the District, secured by a direct and continuing pledge of ad valorem taxes (“I&S tax”) levied on all taxable property within the District, without limitation as to rate or amount. The Limited Tax Obligations are direct obligations of the District, secured by available funds of YISD, including the annual ad valorem maintenance tax (“M&O tax”) levied against all taxable property within the District, subject to the limitations of the maintenance tax authority as prescribed by law.
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- Strong growth in the property tax base supporting the ad valorem tax pledge.
- Moderate direct debt burden, as measured by total debt service and fixed costs relative to total governmental expenditures.
- FYE 2026 preliminary results ahead of budget as the District’s financial stability plan begins to take effect, with a return to general fund budget balance projected by FYE 2028.
Credit Challenges
- Structural general fund budget deficits since FY 2023, with insufficient cost reductions to offset the enrollment and revenue decline.
- Significantly reduced general fund reserves, with the unassigned fund balance down more than 75% since FY 2021, to approximately 4.5% of general fund expenditures for FYE 2026 (unaudited), with downward pressure projected through FY 2027.
- Comparatively weaker sociodemographic characteristics of the District relative to the State and El Pase County.
Rating Sensitivities
For Upgrade
- Financial results that materially exceed budgeted performance, alleviating the structural budget deficit and rebuilding general fund reserves.
- Significant growth in the property tax base boosting the ad valorem tax receipts and increases reserves.
For Downgrade
- An inability to achieve and maintain structural general fund balance by FYE 2028, necessitating the continued issuance of short-term borrowings (TRANs) to support operating cash flows.
- A sustained decline in the ad valorem tax base and/or enrollment that exacerbates the general fund budget deficit and pressures general fund reserves.
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Methodology
Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Information on certain affiliations between directors of KBRA Ratings and rated entities or related third parties can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the US Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. Kroll Bond Rating Agency Japan K.K. is registered as a CRA with the Japan Financial Services Agency. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
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