Fitch Ratings said it has upgraded the underlying rating on Canyons School District Board of Education, Utah's $134 million series 2011 and 2012 general obligation bonds to AAA from AA-plus.

The rating outlook is revised to stable from positive.

The underlying rating and revised outlook reflect the district's credit quality without consideration
of the guaranty provided by the Utah School Bond Default Avoidance Program.

The bonds are secured by the proceeds of an ad valorem property tax levied at a rate sufficient to pay principal and interest.

The district ended its third fiscal year of operation with an increasingly strong unrestricted general fund balance, ample liquidity, a low debt burden that amortizes rapidly, adequately funded pension liabilities, and fully funded other post-employment benefit liabilities.

Medium-term financial projections indicate maintenance of its strong general fund balances based on reasonable assumptions.

The district retains the flexibility to increase taxes, make staff reductions, modify labor agreements, and adjust class sizes if necessary.

The district continues to benefit from positive labor relations which have allowed it to partially offset remuneration cost increases with significant labor concessions.

The district has identified significant facility repair and replacement costs, but it is not being pressured by student enrolment growth and has sufficient facility capacity. Therefore, it can plan its capital improvement program and associated bond issues in stages to avoid pressuring local taxes.

Proximity to the Salt Lake County economic hub enhances the district's own commercial tax base. However, socioeconomic characteristics are somewhat mixed and there has been significant local tax base decline. The state projects tax base stabilization, which appears to be supported by improving local property market conditions.

While the rating is sensitive to fundamental changes in financial management and performance, Fitch does not expect the district to alter its current conservative approach.

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