LOS ANGELES -- The San Francisco Unified School District is planning to sell $205 million of general obligation bonds in a competitive offering on Thursday.
Proceeds will be used to repair and upgrade facilities to current standards, replace aging ventilation systems, and renovate and replace outdated classrooms throughout the district.
The issuance is part of a $531 million bond measure that was approved by San Francisco voters in 2011. The new debt is the second series of bonds issued under the Proposition A authorization.
Following the issuance, the district will have $211 million in authorized issuance remaining.
Ahead of the sale, Standard & Poor's revised its outlook on the district's bonds to stable from negative and affirmed its AA-minus rating on the district's GO bonds.
"The outlook revision reflects our view of the district's better-than-budgeted fund performance in fiscal 2013, an improved revenue environment, and management's expectation that conservative expenditure assumptions will translate into a largely eliminated general fund deficit and good financial position for fiscal 2014," credit analyst Chris Morgan said in a report.
The district — the seventh largest in California — serves more than 55,500 students in more than 160 institutions.
Standard & Poor's views its underlying economic base that is central to the San Francisco Bay Area as a credit strength, as well as its resilient assessed value and high-to-extremely-high wealth and income indicators.
Offsetting these strengths are the district's recent pattern of negative general fund performance, which the district projects will lessen but continue through fiscal 2016, and a significant other post-employment benefits liability.
Moody's Investors Service rates the bonds a notch higher at Aa2, citing the district's exceptionally large assessed valuation that is growing soundly amid a robust regional economy and strong resident wealth levels.
The district's below average fiscal position, which includes a low general fund balance that is unlikely to improve in the near-term, is offset by the size and strength of its tax base, analysts said.
"Bondholders benefit from the legal and statutory provisions governing all California school districts' voter-approved general obligation bonds, most notably the fact that all property taxes for GO bond debt service are levied and collected by the county and forwarded to the paying agent with district involvement," analysts said in the credit report.
The Moody's rating affects approximately $845 million in debt, including this week's new issue.
The outlook is not specified.
Sidley Austin LLP is bond counsel and Tamalpais Advisors, Inc. is financial advisor for Thursday's deal.