The Rating Outlook is Stable
The bonds are secured by an ad valorem tax levied against all taxable property within the district, limited to
KEY RATING DRIVERS
SOUND FINANCIAL POSITION: The district maintains sound and stable finances, characterized by solid reserves and surplus operations despite recent state funding cuts and moderate, counter-cyclic enrollment declines. The district's financial profile is underpinned by ample revenue-raising flexibility through available taxing margin and low tuition rates in conjunction with moderate expenditure flexibility.
NARROW ECONOMIC PROFILE: The local economy is generally stable but rural in nature and driven largely by the energy sector. County unemployment is typically below that of the state and U.S. Local income/wealth levels are generally below state and national averages.
RAPID TAV EXPANSION; HIGH CONCENTRATION: The district's tax base is well represented by all segments of the oil & gas industry, characteristic of the region. TAV has grown rapidly due to robust economic activity in this sector. High taxpayer and sector concentration persists, but has declined with recent TAV expansion.
MODERATE LONG-TERM LIABILITIES: Overall debt levels are moderate. Near-term capital needs are limited and appear manageable given plans for modest pay-go capital spending. Carrying costs are low.
SHIFT IN CREDIT FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics, including the district's solid financial position and conservative fiscal practices. The Stable Outlook reflects Fitch's expectations that such shifts are unlikely.
The district serves
RAPID TAV GROWTH TRENDS REFLECT ROBUST ENERGY BOOM
The local economy is generally stable but concentrated, with much of the area's economic activity driven by the energy sector. Oil/gas business concerns center around working the long-productive
Tax base and sector concentration among the district's top 10 taxpayers remains elevated at 19% of TAV in fiscal 2014. Top taxpayer concentration is down significantly from the 33% in fiscal 2012 as a result of the large jump in TAV in fiscal 2013. Alon USA, a long-standing refinery, is the district's top taxpayer, providing 7% of the total. Management anticipates flat TAV in fiscal 2015 that may ultimately result in further TAV growth based on conservative, preliminary assumptions provided by the appraisal district that assume a stout buffer against possible appeals. Fitch believes these assumptions are reasonable given recent TAV trends and significant oil/gas exploration, and associated economic activity still underway despite the inherent volatility of oil & gas prices.
SOUND FINANCIAL PROFILE; REVENUE-RAISING AND SPENDING FLEXIBILITY
The district's financial performance is enhanced by a diverse revenue stream and revenue-raising capacity, comparable to all
The district continues to produce solid, positive operating margins, averaging 3.8% over fiscal years 2009-2013. Temporary and multi-year expenditure cuts in response to state funding shortfalls and enrollment declines drive positive results. The district, like most community colleges, maintains inherent spending flexibility by employing largely part-time, non-tenured faculty.
Liquidity as measured by available funds (cash and investments not permanently restricted) to expenses remained adequate and slightly improved at
The structurally balanced
Preliminary budget plans for fiscal 2015 include the development of a structurally balanced operating budget supported by assumptions of stable state revenue in the current biennium (fiscals 2014-2015) and ample revenue-raising flexibility, along with projections for added, moderate enrollment declines. The district maintains significant capacity under its total tax rate cap, levying roughly
COUNTER-CYCLIC ENROLLMENT TRENDS
The district maintains a competitive position in its large regional service area given partnerships with various local school districts to provide college coursework. Continued expansion of its offerings at the
Enrollment peaked in 2011 during the recession and has since eroded with improvement in the local economy. Student enrollment as measured by unduplicated credit enrollment totaled 5,894 in fiscal 2013, reflecting the effect of a cumulative 9% decline over the last two fiscal years. Nonetheless, the district maintains some of the residual effect of enrollment gains made over the recession; credit-hour enrollment hovers closer to pre-2011 levels, which Fitch believes may indicate a larger student base has developed. Management anticipates moderate enrollment declines experienced in fiscal 2014 will likely continue over the near term given favorable regional economic conditions. Fitch expects the district will be able to offset much of this pressure however with use of its expenditure flexibility.
MODERATE LONG-TERM LIABILITIES
Overall debt is moderate at
The college participates in the state-administered Teachers Retirement System of
The state began shifting some of this funding burden to community college districts in the 2012-2013 biennium, requiring districts to contribute more (roughly 60%) of the annual cost. The employer's pension contribution is now shared at a marginally lower 50% with the state as of the 2014-2015 biennium. Despite the increase, carrying costs for debt service, pension, and OPEB costs, net of state support, remained low at 6.3% of total expenses in fiscal 2013.
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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