Fitch Ratings affirms the following ratings of the --
In addition, Fitch affirms the school board's implied general obligation (GO) rating at 'AA'.
The Rating Outlook is Stable.
The COPs are secured by lease payments made by the school board to the trustee pursuant to a master lease purchase agreement. Lease payments are payable from legally available funds of the district, subject to annual appropriation by the school board. The district is required to appropriate funds for outstanding leases on an all or none basis.
KEY RATING DRIVERS
IMPLIED GO RATING: The 'AA' implied GO rating reflects the district's solid financial position and maintenance of ample reserves despite planned general fund drawdowns in fiscals 2012 and 2013.
FAVORABLE DEBT BURDEN: District debt levels are expected to remain modest given the absence of any plans to issue new debt and above average amortization of existing COPs. Carrying costs for long- term liabilities are low.
IMPROVING ECONOMIC PROFILE: The taxable assessed value (TAV) declines in fiscals 2013 and 2014 have moderated from those of the prior two fiscal years. Unemployment improved significantly year- over-year and is now below the national average.
COPS APPROPRIATION RISK: The one-notch rating difference between the implied GO and the COPs recognizes the non-appropriation risk inherent in the COPs structure. The all or none appropriation feature of the master lease and the essential nature of leased assets, which are subject to surrender in the event of non- appropriation, temper this risk.
FISCAL IMBALANCE: Continued structural imbalance could result in negative rating action.
The school district, which is coterminous with
AMPLE RESERVES DESPITE DRAWDOWNS IN FISCALS 2012 and 2013
The 12.6 percent (
BALANCED OPERATIONS PROJECTED FOR FISCAL 2014
Management anticipates fiscal 2014 general fund reserves will remain consistent with prior year levels based on increased state funding and strategic budget cutting. Fiscal 2014 state funding is budgeted to increase by
The school board typically budgets the use of a significant amount of reserves, but actual results usually outperform the budget due to conservative budgeting. Fitch believes the district retains a fair amount of expenditure flexibility allowing it to reduce spending further if needed. However the return to structural balance and maintenance of high reserves are keys to credit stability.
CONTINUED IMPROVEMENT IN REGIONAL ECONOMY
After losing approximately 42 percent of its value since 2008, TAV contraction has moderated with values down 3.1 percent and 0.7 percent in fiscals 2013 and 2014, respectively, compared to declines of 6.5 percent and 12.9 percent in fiscals 2012 and 2011, respectively.
LOW DEBT BURDEN, AFFORDABLE CARRYING COSTS
Overall debt levels are modest at
The district's fiscal 2014-2018 capital plan totals
Pension obligations are limited to the district's participation in the well-funded statewide multiple-employer pension plan (FRS). The district's contribution in fiscal 2013 totaled
The district offers an implicit subsidy for other post- employment benefits (OPEB). Fiscal 2013 pay-as-you-go contributions, which are less than the annual required contribution (ARC), represented only 0.2 percent of governmental funds spending. If the fiscal 2013 ARC had been fully funded, the contribution would represent a still modest 0.6 percent of spending. Carrying costs (including debt service, pension and OPEB costs) are low at less than 6 percent of spending.
MASTER LEASE STRUCTURE MITIGATES APPROPRIATION RISK
The district continues to pay COPs debt service with revenue from its 1.5 capital outlay millage, although all legally available revenues can be used for this purpose. The capital outlay millage provides ample 2.2x coverage of maximum annual debt service based on fiscal 2013 TAV.
The master lease structure on the 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 33 percent of the district's total facilities. Fitch considers this a strong incentive to appropriate.
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 the