The 'AAA' long-term rating is based on a guaranty provided by the
The bonds are scheduled for negotiated sale the week of
In addition, Fitch assigns an 'A+' underlying rating to the bonds and affirms the 'A+' rating on the district's
The Rating Outlook is Stable.
The bonds are payable and secured by an unlimited property tax levied against all taxable property within the district. The bonds are also insured as to principal and interest repayment from a guaranty provided by the Texas PSF.
KEY RATING DRIVERS
LIMITED DEBT FLEXIBILITY: The district's debt profile is Fitch's key credit concern. Overall debt levels are high, amortization is slow, and the annual debt cost on the budget is growing. Absent continued healthy tax base growth, the district will need to restructure outstanding debt to avoid transferring general fund revenues to subsidize debt service prior to raising the debt service tax rate above the state's statutory maximum for new issues, where it currently stands.
SOUND FISCAL CUSHION MAINTAINED: Conservative budgeting of attendance-based state aid, attention to spending levels, and previous debt restructurings have facilitated consecutive years of general fund surpluses that have improved fund balance. The district's high level of reserves is the primary mitigant to Fitch's concerns regarding the debt profile and limited ability to raise revenues.
ENROLLMENT GROWTH COOLING: Previously rapid enrollment growth has subsided to a moderate pace, resulting in sufficient facility capacity for the near term.
DECREASE IN TAX BASE: Two years of strong taxable assessed valuation (TAV) growth were erased when a major taxpayer moved a portion of its operations from the district. Residential growth is stable.
DETERIORATION OF FINANCIAL FLEXIBILITY: Due to the district's high tax rate, growing fixed cost burden, revenue inflexibility, and need to restructure current debt service to mitigate pressure on the general fund, any deterioration of the district's ample operating reserves or further material TAV weakness will put negative pressure on the rating.
White Settlement ISD is located 11 miles due west of
HIGHLY LEVERAGED, NEGLIGIBLE DEBT FLEXIBILITY
A key credit concern is the district's ascending debt service schedule and high debt service tax rate, which at
The agreement was made in 2008 at the time of the last new money debt issuance in order to meet the state's tax rate capacity test. The district agreed to dedicate
Recent debt restructurings, together with this refunding, provide near-term flexibility as to the tax rate. Officials project that revenues from the
However, absent a change to state law and even with modestly positive tax base prospects, the district will need to further restructure its debt to address annual increases in debt service after 2024. The district has no near-term debt needs due to excess facility capacity. However, Fitch views the severely limited debt flexibility negatively and expects district capital needs to grow over the intermediate term.
Overall debt on a current accretion basis is high at
SOUND FISCAL CUSHION
The district's stable operating performance has been aided by management's continued conservative budget of enrollment growth, on which state aid for operations is largely based, and more recently, management's decision to restructure debt rather than budget general fund moneys to make up the tax rate-debt service shortfall. Per-pupil state funding was restored to prior levels following budget cuts in the 2011-2012 biennium, producing fiscal 2013 revenues in excess of budget.
The district concluded fiscal 2013 with a
MAINTENANCE OF HIGH RESERVES CRITICAL TO RATING STABILITY
The current fiscal 2014
Management does not have a formal fund balance target but has expressed the goal of maintaining general fund reserves between 2.5 and 3 months of operating costs. Fitch views the presence of this sound fiscal cushion as critical to stability in the underlying 'A+' rating given the debt profile, limitation in revenue raising capacity, and taxpayer concentration risk factors.
TAX BASE CONCENTRATION
The district's primarily residential tax base experienced a 9% increase in fiscal 2013, primarily due to the robust TAV growth of the largest taxpayer,
BEDROOM COMMUNITY IN
The district benefits from its location in the extensive
The area has maintained an overall positive employment profile despite recent layoffs at major employer Lockheed Martin, whose headquarters sit just north of the district.
The level of residential development activity has slowed in the district, and consequently enrollment growth is at a more moderate pace than in prior years. Previously rapid annual enrollment gains of between 4%-6% have moderated to a more manageable 3% per year and officials expect this more moderate level of growth to continue in the next few years.
The judge reopened the lawsuit in
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
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