In addition, Fitch assigns an underlying rating of 'AA' to the series 2014 bonds.
The Rating Outlook is Stable.
The bonds are expected to sell via negotiated sale on
The bonds are secured by the levy of an ad valorem tax on all taxable property within the district without limitation as to rate or amount.
KEY RATING DRIVERS
STABLE AND DIVERSE ECONOMY: The economy benefits from its close proximity to
IMPROVING FINANCIAL PROFILE: Over the last two years, the district's financial position has improved primarily as a result of the passage of a new, continuing operating levy. Reserve levels are expected to remain solid given management's history of conservative budgeting.
MANAGEABLE LONG-TERM OBLIGATIONS: With consideration of this debt issue, the district's overall debt levels should remain moderate given below-average amortization and no plans for future debt issuance. Carrying costs inclusive of debt service, pension and other post-employment benefits (OPEB) are manageable.
STRONG PROGRAM ESSENTIALS: The series 2014 bonds qualify for the
SHIFT IN FUNDAMENTALS: The underlying rating is sensitive to shifts in the district's fundamental credit characteristics including continued voter support for new levies and maintenance of healthy reserve levels.
PROGRAM RATING: The program rating is sensitive to changes in the state's 'AA+' GO bond rating on which the program rating is based, as well as changes in the statues, regulations, or administrative procedures governing the program.
STABLE AND DIVERSE ECONOMY
The district economy is diverse, with financial service companies, healthcare, government, and manufacturing. It also benefits from its close proximity to
The district's assessed valuation has remained stable, declining by only 3.8% from 2010 to 2014. The district is currently undergoing a sexennial reappraisal with another small decline anticipated. The
DEMONSTRATED VOTER SUPPORT FOR TAX LEVIES
Property tax revenues, which represent the largest source of general fund revenues at 54%, are healthy with an average three-year current collection rate of 97%.
IMPROVING FINANCIAL POSITION
Audited results showing ebb and flow of the general fund balance is very common among
On a GAAP basis, after recording general fund deficits after transfers of
For 2012 and 2013 the district reported general fund operating surpluses after transfers of
For fiscal year-end
STRONG CASH RESERVES OVER FORECASTED PERIOD
MANAGEABLE DEBT BURDEN
Fitch considers the district's overall debt burden moderate at 3.4% of market value. Debt levels should remain stable as the district has no plans for future borrowing but slowly amortizes debt. This new debt issuance, which is expected to have a 38 year amortization in line with the State's adoption of a 40-year life for buildings, will reduce amortization to what Fitch considers a slow 28% over 10 years.
The district contributes to the School Employees Retirement System (SERS) and the State Teachers Retirement System (STRS) to fund both pension and OPEB. Both SERS and STRS are cost-sharing, multiple-employer defined benefit plans. At
Total carrying costs for debt service, pensions and OPEB are affordable at 13.1% of total governmental fund expenditures and will increase modestly with this new debt issuance. The SERS plan has been fully funding its actuarially required contribution (ARC). The moderate cost is due in part to the slow amortization and STRS' underfunding of its ARC; the plan funded only 46% of the ARC in fiscal 2013. Pension related costs could rise over time if STRS moves towards full funding of its ARC. Contributions to STRS represent 5.6% of the district's fiscal 2013 government fund spending and Fitch believes the district could absorb a moderate increase.
STRONG PROGRAM ESSENTIALS
The 'AA' program rating is based on the qualification of the series 2014 bonds for participation in the state enhancement program.
Participation requirements are stringent, including 2.5x coverage of maximum annual debt service (MADS) by unrestricted state foundation aid on proposed bonds and any outstanding obligations covered by the program. Fiscal year 2014 estimated state foundation aid to the district is 3.5x the MADS for debt to which state aid is pledged.
Program mechanics are strong.
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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