Standard & Poor’s upgraded the Palo Alto Unified School District to AAA from AA-plus, making it one of just six California school districts with that rating.

The district is beginning a major borrowing campaign after voters approved $378 million of general obligation bonds in the June primary election.

Palo Alto, the home of Stanford University, is a wealthy community at the heart of Silicon Valley with median incomes at almost twice the national average and an unemployment rate of just 2.7%.

The upgrade reflects the district’s “consistent” financial performance, “strong and diverse” economy, “extremely strong” wealth and income levels, and “low” debt levels, said Standard & Poor’s analyst Shannon Groff in a report.

The district is a “basic aid” district under California law, which means it is not subject to state revenue limits. That distinction earned the district an extra $29 million in fiscal 2008, Groff said. The school also brought in an additional $9.2 million from a parcel tax to fund class size reductions and other educational programs. It received another $3 million from a local schools foundation and its Parent Teacher Association during the budget year.

That strong financial support has allowed the district to maintain financial reserves of about 15% of spending. Its debt burden is “low” at 2.5% of assessed valuation, Groff said.

The district is rated Aa2 by Moody’s Investors Service. It is not rated by Fitch Ratings.

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