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Rating Action: Moody's upgrades Hughson USD and Hughson USD SFID No. 1, CA's GOULT to Aa3; assigns A1 issuer ratingGlobal Credit Research - 08 Mar 2021New York, March 08, 2021 -- Moody's Investors Service has assigned an A1 issuer rating to Hughson Unified School District (Hughson USD), CA. The issuer rating reflects the district's ability to repay debt and debt like obligations without consideration of any pledge, security, or structural features. Concurrently, Moody's has upgraded the district's general obligation unlimited tax (GOULT) rating to Aa3 from A1 and upgraded to Aa3 from A1 on the Hughson USD School Facilities Improvement District No. 1 (SFID) general obligation unlimited tax (GOULT). This action concludes a review with direction uncertain initiated on January 26, 2021 in conjunction with the release of Moody's new US K-12 Public School Districts Methodology. The upgrade of the district's GOULT rating affects approximately $19.9 million in Moody's rated debt; while the upgrade for the SFID affects $3.2 million in Moody's rated debt.RATINGS RATIONALEThe A1 issuer rating reflects the district's stable economy, dominated by large, agricultural uses and above average income levels. The rating also incorporates the district's solid financial performance that will remain stable and leverage that will remain manageable given continued revenue growth and no outstanding GOULT authorization or immediate borrowing plans.The Aa3 ratings on both Hughson USD's GOULT bonds and the SFID No. 1 GOULT bonds are one notch higher than the issuer rating as both tax bases are sizeable and growing, exceeding $1 billion in assessed valuation (AV) with no taxpayer concentration. SFID No. 1's AV of close to $1.3 billion represents 67.4% of the district's total $1.8 billion tax base and includes areas in which future housing development is anticipated. The one notch distinction reflects California school district general obligation (GO) bond security features that include the physical separation through a "lockbox" for pledged property tax collections and a security interest created by statute.RATING OUTLOOKOutlooks are typically not assigned to local governments with similar amounts of debt.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Significant expansion and economic diversification- Sustained improvement to income levelsFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Material deterioration of district reserves and liquidity- Regional economic declineLEGAL SECURITYThe district GO bonds are secured by the levy of ad valorem taxes, unlimited as to rate or amount, upon all taxable property within the district. The portion of the levy restricted for debt service is collected, held and transferred directly to the paying agent by Stanislaus County on behalf of the district. The SFID No. 1 GO bonds are similarly secured by the levy of ad valorem taxes on property within its boundaries.PROFILEHughson Unified School District operates two elementary schools, one middle school, one high school and one continuation school, with a current enrollment of 2,070 students as of fiscal 2021. The SFID was formed by the school district in 2016 to fund improvements to the elementary schools located in the former Hughson Elementary School District. The SFID encompasses 52.0 square miles, including the city of Hughson and surrounding unincorporated areas of Stanislaus County, with an estimated population of 10,063.METHODOLOGYThe principal methodology used in these ratings was US K-12 Public School Districts Methodology published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1202421. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. 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For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. 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