LOS ANGELES — A San Diego area school district once on the verge of a state takeover had its certificates of participation raised to investment grade.

San Ysidro School District faced a potential state takeover as recently as 2014 due to a cash shortfall.

Fitch Ratings raised $6.9 million certificates of participation to BBB-plus from BB, and also upgraded $33.6 million of general obligation bonds to A-minus from BBB-minus.

Fitch also revised the district's outlook to stable from positive at the higher rating.

The school district lacked management stability after former superintendent Manuel Paul resigned in 2013 amid a pay-to-play scandal. Paul was sentenced to two months in jail in January 2015 for threatening to withhold work from a contractor unless he gave Paul political contributions.

"The district's operations have continued to strengthen following the recent turnover of its governing board and management, in combination with increased state funding," Fitch analysts wrote in last week's rating report.

The district hired Julio Fonseco in July 2015 as the permanent school chief.

The district had three interim superintendents in two years prior to Fonseca's tenure.

Fitch analysts called the school district's current healthy fiscal state "a sharp turnaround from the fiscal distress of prior years."

The district projects a third consecutive year of surplus operations in fiscal 2016 and has restored cash and reserve balances to healthy levels in a sharp turnaround, Fitch analysts said.

The district is part of the San Diego regional economy, which has experienced sustained employment growth in recent years, Fitch said.

The 4,800 enrollment in the pre-school through 8th-grade school is stable, Fitch said.

Debt levels and slow amortization were cited in the still-low ratings.

Overall the debt levels are high at 7.3% of taxable assessed value and amortization of direct debt is slow with 29% of outstanding principal retired in 10 years, Fitch said.

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