The Rating Outlook is Stable.
The bonds are secured by an unlimited ad valorem tax on all taxable property within the district.
KEY RATING DRIVERS
FINANCIAL PRESSURE DECREASED: Expectations for the district's near-term financial position are greatly improved with the stabilized state funding environment. While general fund balance reductions are not anticipated to nearly the same magnitude as they had been previously, declining and variable average daily attendance (ADA) continues to create budgeting obstacles for the district.
IMPROVED REVENUE PROSPECTS: Prospects for state funding, which Fitch views as volatile and difficult to predict, are better with the general improvement of the state's finances and economy, as well as the 2012 voter approval of temporary tax increases under Proposition 30. Based on the district's student demographics, a new local control funding formula (LCFF) will bolster general fund revenues for the district.
LIMITED ECONOMY: The local economy is largely based on tourism and characterized by average wealth. The district's tax base posted a mild decline for fiscal 2014 following two years of stability. The district's tax base for fiscal 2014 remains about 12% below peak pre-recession levels.
MODERATE DEBT PROFILE: Overall debt levels are low-to-moderate. However, debt amortization is very slow, reflecting the need to stay under the
ENROLLMENT AND RESERVES DETERMINE POSITIVE CHANGE: Upward rating movement will be dependent on a stabilized enrollment trend and the district's ability to retain or build its high reserve position.
The district is located about 46 miles north of
FINANCIAL PRESSURES DECREASED
Previously expected financial pressures have begun to diminish with the passage of proposition 30, the ongoing implementation of a new LCFF, and the overall improved state revenue environment. The district originally expected to finish fiscal 2012 with a
State funding declines and declining enrollment have had a significant negative impact on district revenues. The district experienced a cumulative 19.3% loss in revenue from fiscals 2009 to 2013. However, management was able to reduce expenses 16.5% during this period through increased class sizes, closed school sites, reduced school days, and workforce reductions. The district has slowly started to restore cuts given the improved revenue environment, although expenditure flexibility remains tight.
Management expects to utilize general fund balance in fiscals 2014 and 2015 for one-time items related to common core expenses before adding to fund balance once again in fiscal 2016. The district projects that it will utilize about
Other financial pressures persist, including the district's declining and variable enrollment environment. District enrollment declined a cumulative 15.3% from fiscals 2006 to 2011, from 954 to 808. Enrollment has fluctuated since as well, including an unexpected loss of 59 ADA in fiscal 2013 and an unexpected gain of 50 ADA in fiscal 2014. Fitch believes that a stabilized enrollment trend is critical to any potential upward rating momentum.
IMPROVED REVENUE PROSPECTS
State funding is expected to provide a moderate portion of district revenues upon implementation of LCFF despite the district's recent basic aid status. Due to rising revenue and the relatively high portion of the student body targeted by LCFF funding, the district is expected to be removed from basic aid status in fiscal 2015 and stands to benefit if the governor's fiscal 2015 budget is adopted as proposed, which would boost district revenues in fiscals 2015 and 2016.
The district's location in northeast
MODERATE DEBT PROFILE
District debt levels are low-to-moderate at 1.5% of TAV and
Funding for the
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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