The 'AAA' rating on the bonds is based on a guaranty provided by the
In addition, Fitch affirms the following ratings:
The Rating Outlook is Stable.
The bonds are secured by ad valorem taxes levied against all taxable property within the district, without limitation as to rate or amount. In addition, series 2006, 2007, 2009, 2010, and 2014 bonds are secured by the Texas PSF, whose bond guarantee program is rated 'AAA' by Fitch.
KEY RATING DRIVERS
POSITIVE FINANCIAL PERFORMANCE: The district has consistently posted positive operating results and maintained solid reserve levels despite reductions in state aid and cost pressures from enrollment growth.
ELEVATED DEBT LEVELS TO INCREASE: High debt ratios are expected to increase further given the slow repayment of outstanding principal and near-term borrowing plans. The elongated repayment structure of proposed debt raises questions about its affordability.
STATE FUNDING CHALLENGES ABATED: Increases in state aid for fiscals 2014 and 2015 will reestablish growth in a significant source of operating revenue for the district after several years of reductions to state support, despite increasing property wealth.
STRONG TAX BASE & AREA ECONOMY: The district tax base is growing at an increased rate after a moderate slowdown post-recession, while the area unemployment rate continues to trend below state and national averages.
HIGH DEBT CAPS RATING: A high and growing debt burden likely precludes positive rating action over the near term. However, Fitch's expectations for continued tax base growth combined with the district's history of sound financial management, positive operating performance, and strong reserve levels are important credit strengths that moderate this risk.
The 128-square mile district is located immediately to the west and southwest of
HIGH DEBT BURDEN
Incorporating this issue, overall debt ratios are high at
The district will increase its tax rate to
Affordability of current and planned debt is dependent upon district tax base performance, which has recently improved. TAV increased 6.0% and 6.2% in fiscals 2013 and 2014 following several years of more moderate growth after the recession. Fitch believes assumptions for continued yet moderate growth going forward are reasonable.
CONSISTENT POSITIVE OPERATING RESULTS
Audited results for fiscal 2013 depict a modest
State aid declined slightly in fiscals 2012 and 2013 as a result of an adjustment in previous years' lower than projected average daily attendance (ADA) and a legislative reduction in school support at the state level. State aid is projected to increase 8.1% in fiscal 2014 and 4.9% in fiscal 2015 due to increased school funding at the state level and enrollment gains within the district. Enrollment growth has recently trended at approximately 300 students per year, and the district projects similar growth in the medium term based on a recent demographic study.
CONSERVATIVE FISCAL 2014 BUDGET
In fiscal 2014, the district has budgeted a one-time capital expenditure of
STABLE AREA ECONOMY
The district benefits from its location near
OTHER LONG-TERM LIABILITIES MANAGEABLE
The district's pension liabilities are limited to its participation in the state pension plan administered by the Teachers Retirement System of
The state's payment of district pension costs is an important credit strength as it keeps overall carrying costs manageable in the face of a high and growing debt burden. Carrying costs for the district (debt service, pension, and OPEB costs net of state support) remain very manageable, consuming 14.7% of governmental fund spending in fiscal 2013. Total carrying costs rise to a high 26.31%, inclusive of maximum annual debt service after issuance of the series 2014 and planned 2016 bonds. Fitch will continue to monitor the level of state support for school district pension payments, noting pension contributions for all districts in the state will increase modestly to 1.5% on the statutory minimum portion of payroll from 0% beginning in fiscal 2015.
The judge agreed to reopen testimony 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
Shane Sellstrom, +1 512-215-3727
Gabriela Gutierrez, +1 512-215-3731
Amy Laskey, +1 212-908-1568
Source: Fitch Ratings
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