The COPs will be sold on a negotiated basis on
In addition, Fitch affirms the rating on the following outstanding COPs:
Fitch also affirms the school board's implied general obligation (GO) rating at 'AA'.
The Rating Outlook is Stable.
The COPs are secured by lease payments made by the district to the trustee pursuant to a master lease purchase agreement. Lease payments are payable from legally available funds of the district, subject to annual appropriation by the school board. The district is required to appropriate funds for outstanding leases on an all or none basis.
KEY RATING DRIVERS
IMPLIED GO RATING: The 'AA' implied GO rating reflects the district's solid financial position and maintenance of ample reserves, with a return to balanced operations projected for fiscal 2014.
FAVORABLE DEBT BURDEN: District debt levels are expected to remain modest given the absence of any plans to issue new debt and above average amortization of existing COPs. Carrying costs for long-term liabilities are low.
IMPROVING ECONOMIC PROFILE: Taxable assessed value (TAV) increased solidly in fiscals 2014 and 2015, after a period of significant contraction. Unemployment has improved significantly year-over-year and is now below the state and national averages.
COPS APPROPRIATION RISK: The one notch rating difference between the implied GO and the COPs recognizes the non-appropriation risk inherent in the COPs structure. The all or none appropriation feature of the master lease and the essential nature of leased assets, which are subject to surrender in the event of non-appropriation, temper this risk.
The rating is sensitive to shifts in fundamental credit characteristics, including the school board's strong financial management practices, conservative budgeting, and maintenance of ample reserves. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
The school district, which is coterminous with
AMPLE RESERVES DESPITE DRAWDOWNS IN FISCALS 2012 and 2013
The 22% (
SURPLUS PROJECTED FOR FISCAL 2014
Unaudited fiscal 2014 results show a return to balanced operations, with a slight general fund surplus of
ADDITION TO FUND BALANCE PROJECTED FOR FISCAL 2015
The fiscal 2015 tentative budget totals
The school board typically budgets the use of a significant amount of reserves, but actual results usually outperform the budget due to conservative budgeting. Fitch believes the district retains a fair amount of expenditure flexibility allowing it to reduce spending further if needed.
Management anticipates results similar to fiscal 2014, with a moderate general fund surplus of
CONTINUED IMPROVEMENT IN REGIONAL ECONOMY
After losing approximately 42% of its value since 2008, TAV improved solidly in fiscals 2014 and 2015, with growth of 4.2% and 8.4%, respectively.
LOW DEBT BURDEN, AFFORDABLE CARRYING COSTS
Overall debt levels are modest at
The district's fiscal 2014-2018 capital plan totals
Pension obligations are limited to the district's participation in the well-funded statewide multiple-employer pension plan (FRS). The district's contribution in fiscal 2013 totaled
The district offers an implicit subsidy for other post- employment benefits (OPEB). Fiscal 2013 pay-as-you-go contributions, which are less than the annual required contribution (ARC), represented only 0.2% of governmental funds spending. If the fiscal 2013 ARC had been fully funded, the contribution would represent a still modest 0.6% of spending. Carrying costs (including debt service, pension and OPEB costs) are low at less than 9% of spending.
MASTER LEASE STRUCTURE MITIGATES APPROPRIATION RISK
The district continues to pay COPs debt service with revenue from its 1.5 capital outlay millage, although all legally available revenues can be used for this purpose. The capital outlay millage provides ample 2.2x coverage of maximum annual debt service based on fiscal 2013 TAV.
The master lease structure on the COPs is strong, requiring an all or none appropriation. In the case of non-appropriation, the trustee is authorized to require the district to surrender use of all facilities under the master lease, which would amount to approximately 33% of the district's total facilities. Fitch considers this a strong incentive to appropriate.
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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OCTOBER 30, 2014
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