The COPs will be sold via negotiation during the week of
In addition, Fitch affirms the ratings on the following outstanding
--Implied unlimited tax general obligation rating (ULTGO) at 'AA-'.
The Rating Outlook is Stable.
The COPs are secured by lease rental payments made by the district subject to annual appropriation. Lease rental payments are payable from any legally available funds of the district.
KEY RATING DRIVERS
ADEQUATE FINANCIAL PROFILE: Fitch's assessment of the district's financial position considers its modest fund balance position, satisfactory historical operating performance, and dependence on state sources for operations.
FAVORABLE DEBT POSITION: Outstanding debt obligations are very affordable, debt ratios are low and future capital needs are manageable and largely funded from pay-go sources including revenue from a voter-approved sales tax. No new debt is expected.
LIMITED ECONOMIC BASE: The regional economy is relatively limited in terms of industry and employment opportunities and unemployment remains high. Resident income metrics are below the state and nation. Importantly, enrollment has been on the decline which has had a direct negative impact on state funding levels.
RATING DIFFERENTIAL FOR COPS: A one-notch rating distinction between the COPs and the implied ULTGO reflects annual appropriation risk, the absence of a specific pledge of revenue, and the inability to increase taxes specifically to repay the obligation. The master lease structure tempers appropriation risk as a large share of existing educational facilities would be subject to forfeiture in case of non-appropriation.
STRUCTURAL BALANCE: The rating is sensitive to the district's ability to reverse a recent trend of operating deficits given its already modest reserve position.
The geographic boundaries of the district are coterminous with
MODEST FUND BALANCE POSITION
The district's unrestricted general fund balance provides a moderate cushion against budgetary demands. The balance stands at
FISCAL 2014 DEFICIT ANTICIPATED FOLLOWING FAILED REFERENDUM
HEALTHIER REVENUE ENVIRONMENT BUT CONCERN ABOUT ENROLLMENT
Operations are predominantly funded through the state education funding formula with extremely limited revenue raising discretion. State allocations for K-12 education funding have improved moderately in recent years but tempered by specific designations of additional funding for wage increases.
The district is also beginning to benefit from additional local capital outlay and discretionary millage revenue due to tax base growth. The taxable assessed valuation (TAV) for fiscal 2014 improved a modest 0.9% but preliminary estimates for fiscal 2015 depict a 4.2% increase to almost
The district's enrollment trend is of some concern. The 2014 enrollment of 12,512 is down 3.7% from 2010, and the state forecasts enrollment falling to 11,728 by 2019. District officials are more optimistic citing growth in sales and impact fee collections as signs of an improved economy and home building activity.
The district is forecasting a return to stable operating results in fiscal 2015. Management has guided the district to satisfactory financial results relative to the budget over the last five fiscal years. Additionally, its maintenance of fund balance at the policy level would be deemed satisfactory for the current rating.
LOW DEBT AND MANAGABLE CAPITAL NEEDS
Overall debt is low at 1.8% of market value and
Pension and other post-employment benefits do not represent a burden on the district budget. Consequently, carrying costs associated with retiree benefits and debt service is very low, consuming about 11% of governmental spending.
LOCAL OPTION MILLAGE EARMARKED FOR COP REPAYMENT
MASTER LEASE OFFERS STRONG INCENTIVE TO APPROPRIATE
Lease payments are made by the district under a master lease program that requires the district to appropriate funds for all outstanding sub-leases on an 'all or none' basis. An event of non-appropriation would result in the termination of the master lease and the surrender to the trustee of all lease-purchased projects under the master lease. Approximately 46% of the district's students attend classes in a facility leased under the master lease. Master lease projects include the
LIMITED AREA ECONOMY
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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