The bonds have been placed on Rating Watch Negative.
Fitch Ratings has also withdrawn the 'A-' rating on the district's ULT refunding bonds, series 2013 as the bond was not sold.
The bonds are secured by an unlimited property tax levied annually against all taxable property within the district. Additional security is provided by the
KEY RATING DRIVERS
STATE INVESTIGATION HIGHLIGHTS WEAK MANAGEMENT DYNAMICS: The downgrade reflects the district's very weak governance and management practices that were uncovered by a recent state investigation of the district. The findings published by the
The report references accountability and non-compliance issues spanning various tiers of leadership at this small 2,000 student district most notably resulting in the arrests of the board president and an assistant superintendent on bribery charges, as well as the departure of the district's business manager.
STATE CONSERVATORS ASSIGNED: The TEA has assigned two conservators to the district with oversight authority and broad power to make and influence management decisions, including a veto of board decisions going forward. Fitch understands that the conservators are beginning their work at the district this week.
FULL CREDIT REVIEW PLANNED: The Rating Watch Negative reflects the possibility that the rating may be downgraded further, pending discussion with district management and review of financial statements. The one-notch downgrade to 'A-' is an interim rating action based on limited information available to Fitch. The 'A-' rating reflects the highest rating level the district could achieve based on that information.
The Negative Rating Watch reflects the heightened probability of a downgrade over the next few months. While the presence of state conservators and prompt replacement of the board president and business manager may provide a more stable level of oversight and management going forward, Fitch remains concerned about the weak governing climate and its potential impact to district finances.
Fitch expects to resolve the Rating Watch Negative following a review of available financial statements and discussions with management. The district's historical financial performance and financial position as of fiscal 2012 was sound.
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' (
U.S. Local Government Tax-Supported Rating Criteria
Tax-Supported Rating Criteria
Source: Fitch Ratings
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