Fitch Ratings affirms the following ratings of --
In a release on
The ULT bonds are secured by an unlimited ad valorem tax pledge levied against all taxable property within the district.
Key Rating Drivers
Historically Strong Reserves: The district's strong reserve levels are a key credit strength given its highly concentrated tax base and relatively flat enrollment growth.
Highly Concentrated Tax Base: The district's tax base is highly concentrated in terms of industry composition (oil, gas and chemicals) and among individual taxpayers, resulting in a tax base inherently susceptible to ongoing assessment appeal activity which can have a magnified impact on revenue loss. The districts high reserves provide an adequate cushion to partially offset these concerns.
Weak Socio-Economic Metrics: The local economy is limited, evidenced by stagnant employment levels and an unemployment rate significantly higher than state and national averages. Wealth indices remain below average.
Strong Tax Base Gains: Significant investments among some of the top taxpayers led to strong tax base growth in fiscals 2013 and 2014. This activity offsets the effects of the appeals to some extent but suggests that the tax base will remain highly concentrated.
Mixed Debt Profile: Elevated debt ratios and slow amortization are partially balanced by manageable capital needs and moderate pension costs. There are no immediate plans for additional debt issuance.
Erosion of Financial Flexibility: Fitch views a healthy level of reserves as the primary mitigating factor to the credit risks associated with the district's highly concentrated tax base, settled and potential future tax payer appeals, lack of revenue flexibility to address such settlements, and high debt levels. Notable erosion in reserves could result in negative rating action, but the risks make positive action unlikely.
The district is part of the
Sizeable Reserves Provides Ample Cushion
Fiscal 2012 results were bolstered by a
A property tax dispute settled in
Additional Property Tax Dispute Could Pressure Flexibility
An additional lawsuit filed by Valero with the county appraisal district, could impact the district's local tax levy for the 2013 and 2014 fiscal years. The lawsuit is scheduled for trial in
The uncertain effect of current and potential future appraisal litigation on the district's budget is a key credit concern. Although Fitch believes that the district's general fund reserve levels provide an adequate cushion to absorb the tax rebate liability currently due, recurring revenue losses arising from a negative outcome could rapidly erode financial flexibility and result in negative rating action.
Heavy Tax Base Concentration in the Oil/Gas & Chemical Sectors
Taxpayer concentration is a credit concern; the top 10 payers comprise a high 34 percent of fiscal 2013 TAV and are nearly all part of the oil, gas, and chemical sectors.
Fiscals 2013 and 2014 experienced strong tax base growth of 26 percent and 16 percent, respectively, driven by capital improvements and expansions of major refineries. Due to the expansive industrial base, the district's market value per capita is a high
Mixed Debt Profile
The district's debt burden is elevated at
The district's pension liabilities are limited to its participation in the state pension plan administered by the Teachers Retirement System of
The judge agreed to reopen testimony after the
Additional information is available at '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
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Fitch Ratings affirms the following ratings of