Fitch also assigns an 'AAA' rating to the series 2014-A bonds, which is based on a guarantee provided by the
The series 2014-A and series 2014-B bonds are scheduled for a negotiated sale the week of
In addition, Fitch affirms the following rating:
The Rating Outlook is Stable.
The bonds are secured by an unlimited ad valorem tax levied against all taxable property in the district.
KEY RATING DRIVERS
SOUND FINANCES: Cost savings and enrollment growth have allowed the district to maintain a solid financial profile through a period of reduced state funding. A recent tax ratification election trades off increased debt service for operating flexibility by shifting a portion of the interest and sinking fund (I&S) tax rate to the maintenance and operations (M&O) tax rate, providing the district with an increase in operating revenues.
HIGH DEBT, WELL-FUNDED PENSIONS: High overall debt results from a history of reacting to rapid enrollment. Carrying costs (annual debt service, pension, and other post-employment benefit contributions (OPEB)) place a moderate burden on the budget, reflecting a slow principal amortization rate and the state's strong pension funding support.
TAX BASE GROWTH: Improving home prices and new construction drove moderate fiscal 2014 tax base gains, reversing recent taxable assessed valuation (TAV)losses associated with the recession and mineral valuation declines. Fitch considers the district's projection of ongoing TAV growth reasonable based on regional trends and development underway.
STABLE LOCAL ECONOMY: The district participates in the diverse greater
FINANCIAL, DEBT FLEXIBILITY: The rating is sensitive to changes in the district's financial flexibility, evidenced by sound reserves and adequate tax rate capacity. Further increases in the debt without commensurate tax base growth could put pressure on the rating.
Eagle Mountain-Saginaw ISD is located in
POSITIVE FINANCIAL PERFORMANCE
The district budgets conservatively and has registered positive financial results in four of the past six fiscal years. A fiscal 2013 net deficit of 1.8 million (1.4% of spending) reflected cost pressures of starting up the district's new high school. The district's fiscal 2013 unrestricted general fund balance of
Voters approved an increase in the district's M&O tax rate to
TAX BASE EXPANSION, STRONG DEMOGRAPHICS
The tax base more than tripled over the past 12 years as economic activity throughout the
Recessionary pressures and declining mineral values led to TAV declines between fiscal years 2011 and 2013 prior to a 5.4% gain in fiscal 2014. Officials report that a strengthening residential housing market and new construction are expected to provide ongoing solid TAV growth in the near term, which Fitch considers reasonable, although the tax base remains sensitive to the impact of gas price volatility.
The district's median household income is 135% of the
HIGH DEBT; ONGOING NEEDS
Overall debt of 9.5% of market value is high and amortization is slow, with less than 25% of debt scheduled for repayment in the next 10 years. Proceeds from the series 2014-A and 2014-B bonds will be used to refund a portion of the district's outstanding debt for savings without extending principal repayment.
Officials anticipate new debt issuance in 2015 to fund elementary school construction needs driven by ongoing enrollment growth not anticipated in the last rating. The district's fiscal 2014 I&S tax rate of
The district plans to remarket its series 2011 Variable Rate Demand Obligations (VRDOs) for a new 5-year, fixed-rate period in the summer of 2014. In the unlikely case of a failed remarketing, the district would pay an elevated interest rate, capped at a fixed rate of 8% for the first six months and 10% thereafter on the district's outstanding VRDOs, until successfully remarketed.
LIMITED PENSION/OPEB OBLIGATIONS
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 '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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