--Implied unlimited tax general obligation (ULTGO) at 'AA+';
The Rating Outlook is revised to Positive from Stable for the sales tax bonds. The Rating Outlook is Stable for the implied ULTGO and COPs.
The COPs are secured by lease payments made by the district to the trustee pursuant to a master lease purchase agreement. Lease payments are made from legally available funds of the district, subject to annual appropriation. In the event of less than full appropriation, the trustee may force the district to surrender possession of all leased facilities under the master lease to the trustee for disposition by sale or re-letting of its interest in such facilities.
The sales tax revenue bonds are secured by the district's share of a one-half cent local infrastructure sales tax or CIT, levied and collected by
KEY RATING DRIVERS
IMPROVING SALES TAX COVERAGE: The Outlook revision on the CIT sales tax revenue bonds reflects strengthening debt service coverage, with fiscal 2013 CIT revenues generating 1.20x MADS coverage. Revenues have experienced a three-year upward trend and are reportedly trending higher in fiscal 2014 as well.
STRONG FINANCIAL MANAGEMENT: The district's adherence to its fiscal policies, combined with conservative budgeting and expenditure controls, have contributed to sound reserves despite fluctuations in property tax revenues and state funding.
DIVERSE ECONOMY: The county serves as the economic anchor of western
LOW DEBT BURDEN: The district's debt burden is low, and debt service requirements do not pressure the financial profile. The district has no immediate near-term borrowing plans.
DEPENDENCE ON STATE REVENUES: Like most
RESIDUAL SALES TAX REVENUES MAINTAINED BY DISTRICT: The district continues to hold in reserve a significant amount of residual sales tax revenues, which it has indicated it would utilize if necessary to compensate for any deficiency in pledged revenues.
COPS SUBJECT TO APPROPRIATION: The 'AA' COPs rating reflects the district's general credit quality, the district's obligation to make annually appropriated lease payments under a master lease structure, and the essentiality of leased assets.
INCREASING PLEDGED CIT REVENUES: The sales tax bonds' rating is sensitive to debt service coverage from pledged revenues. A continued positive trend in CIT revenues and coverage likely would result in an upward revision to the rating.
CONTINUED STRONG FINANCIAL MANAGEMENT: The rating is sensitive to shifts in fundamental credit characteristics, including the district's strong financial management practices and maintenance of adequate reserves. The Stable Outlook on the COPs and implied ULTGO reflects Fitch's expectation that such shifts are unlikely.
The district is coterminous with
NARROW BUT IMPROVING SALES TAX COVERAGE
CIT sales tax revenues have continued the upward trend that began in fiscal 2011, with annual increases of 3.7%, 4.2% and 4.5% through fiscal 2013. Fiscal 2013 revenues covered MADS by 1.20 times (x) versus 1.15x for the previous fiscal year; annual coverage for fiscal 2013 was comparable at 1.22x.
Fiscal 2014 monthly sales tax collections through December are reportedly 4.3% higher than the same period for fiscal 2013. The revision in the Rating Outlook to Positive reflects this upward trend in revenues and coverage, and continuation of this trend likely would result in an upgrade.
District residual CIT revenues total
Bond documents restrict additional debt through a 1.20x pro forma MADS additional bonds test. The debt service reserve is funded by a surety policy from
BROAD EMPLOYMENT BASE RECOVERING
Rapid population growth has historically driven corresponding enrollment increases in the district. Recent enrollment growth has become more moderate with a 1.8% increase in fiscal 2013. The district expects moderate enrollment gains to continue for the next few years.
RESERVE LEVELS LOWER BUT SOUND
The district has managed a decline in state funding and the recently imposed unfunded state operating mandates through the use of built up reserves and expenditure cuts. Financial performance for fiscal 2012 and 2013 resulted in deficit operations and a drawdown on general fund reserves, most of which were planned. This followed two fiscal years of surplus operations and a buildup in reserves.
During fiscal 2012, the state cut school aid to districts statewide as it grappled with its own financial pressures. Many districts, including
During fiscal 2013 the district experienced a
FISCAL 2014 BUDGET
The district benefited from the increases in the state's education funding for fiscal 2014 over the prior year, which will pay for teacher salary increases. The fiscal 2014 budget also includes new spending for state mandated reading programs and security, which management will absorb through teacher assignment and scheduling changes, as well as certain temporary hiring freezes and the outsourcing of certain services.
Management has indicated its intention to maintain fund balance levels in excess of its policy. The recent state-mandated spending is generating some pressure on operations, but Fitch believes the district retains the ability to adjust outlays to offset these directives. Management's history of prudent fiscal controls suggests that the district's sound financial profile will be maintained.
FAVORABLE DEBT PROFILE
Overall debt levels are low at
The district's facilities are reportedly in good shape, with capital needs greatly reduced after a building push earlier in the decade driven by escalating enrollment and state mandated class size requirements. The district uses excess revenue from the 1.5 mill capital outlay levy, after COPs debt service, for the majority of its capital and maintenance needs. No additional borrowing is planned presently.
COPS DEBT SERVICE
While any legally available revenue can be used for COPs debt service, the district has historically made payments from the 1.5 mill capital outlay tax. With the district's taxable assessed value (TAV) for fiscal 2014 of
The master lease structure on the district's COPs is strong, requiring an all-or-none appropriation. In the case of non-appropriation, the trustee is authorized to require the district to surrender use of all facilities under the master lease, which would amount to approximately 20% of the district's facilities. Fitch considers this requirement a strong incentive to appropriate.
RETIREMENT COSTS ARE MANAGEABLE
All district employees participate in the state operated retirement system. Pension and OPEB costs are affordable. Total carrying costs for pension, OPEB pay-go and debt service equaled an affordable 7.3% of total fiscal 2013 governmental spending.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
Most Popular Stories
- Reid: Bundy Backers Are 'Domestic Terrorists'
- Twitter Offers App Install Ads
- 'Boats 'N Hoes' PAC Sunk by Complaint
- Judge Tells Dad to Quit Emailing His Kids in All Caps
- Natural Gas Shoots Up on Bullish Stockpile Report
- Michaels Data Breach May Affect 2.6 Million Cards
- Legalize Marijuana But Not Hard Drugs, Say Americans
- Naya Rivera and Lea Michele: The 'Glee' Fight That Never Was?
- Larry Flynt Won't Stop Sending Porn to Congress
- Ex-BP Employee Settles Insider Trading Charges