The Santa Monica-Malibu Unified School District will save taxpayers more than $22 million over the life of its bonds after both Moody's Investors Service and S&P Global affirmed high credit ratings on the district's general obligation bonds, officials announced Wednesday.
Moody's maintained its Aa1 rating while S&P affirmed its AA+ rating for the coastal Los Angeles County district, which serves approximately 8,555 students across Santa Monica and Malibu. The strong ratings resulted in lower borrowing costs than originally projected when the school board approved the bond sale in February.
"We are so pleased to continue to receive strong ratings from both Moody's and S&P," said School Board President Jennifer Smith. "S&P highlighted the district's good management practices, and they were impressed with our long-term financial planning."
The ratings updates came as part of the district's successful $200 million general obligation bond issuance to fund planned modernization projects at schools in both cities. The bond sale attracted more than $350 million in orders from 37 separate investors for the $200 million offering, according to John Baracy, managing director at Baird, the district's senior managing underwriter.
Both rating agencies praised the district's financial stability despite challenges including recent wildfire damage and declining enrollment. The Franklin and Palisades fires destroyed around 1,600 structures in Malibu earlier this year, though no school buildings were damaged.
"The district's debt burden is well above average on a per capita basis relative to that of peers; however, the debt burden remains affordable, in our view, given the affluent population and sizeable tax base," S&P stated in its report.
The district benefits from its "community funded" or "basic aid" status, which means it relies primarily on local property taxes rather than volatile state funding. This designation provides greater financial stability compared to most California school districts that depend on state revenue.
S&P highlighted the district's "extremely strong and resilient local tax base, with very strong incomes, focused in one of Southern California's main economic centers." Resident incomes are nearly 130% of the U.S. median, while assessed value per capita reaches $721,283.
The district generates substantial revenue beyond property taxes through diverse local sources. In fiscal 2024, these included $14.6 million from a parcel tax with no sunset date, $17.6 million from a Santa Monica sales tax, $11 million from facilities agreements, and $10 million from a new property transfer tax.
Moody's noted that despite projected operating deficits through fiscal 2027, the district's reserves will remain stable with total general fund balance staying around 25%. The agency expects enrollment to continue declining at about 3% annually due to high housing costs and low birth rates.
"We continue with many facility improvement projects at our schools to create future ready learning spaces for all students to have access, opportunity and a sense of belonging," said Superintendent Dr. Antonio Shelton.
The district faces some challenges, including elevated debt levels and ongoing discussions about potentially separating into two districts. In September 2024, Santa Monica-Malibu USD and the City of Malibu agreed on documents outlining a proposed separation into Santa Monica Unified and Malibu Unified school districts, though the process requires multiple governmental and voter approvals.
Environmental risks also factor into the ratings, with both agencies noting exposure to wildfires, particularly in the Malibu area. However, Moody's said the district would need to lose close to $7.3 billion in assessed value - nearly 10% of its total tax base - to lose its community funded status, which is "highly unlikely."
The successful bond sale comes at a time when many California school districts face financial pressures from declining state revenues and enrollment drops. The strategic timing of the sale during global uncertainty helped taxpayers save an additional $500,000 in interest costs, officials said.
Municipal Advisor Jon Isom called the investor response "very pleased," noting the district saw interest rates drop more than half a percentage point from initial discussions to the final sale.
The ratings affirm the district's strong financial management practices, including long-term planning, fiscal oversight committees, and diverse revenue streams that provide unusual flexibility for a public school system.
