The 'AAA' rating on the bonds is based on a guaranty provided by the
The bonds are scheduled for negotiated sale the week of
In addition, Fitch also affirms the following ratings:
The Rating Outlook is Stable.
The bonds are direct obligations of the district payable from a continuing direct annual ad valorem tax levied by the district without limit as to rate or amount. The bonds are further secured by the
KEY RATING DRIVERS
SOUND FINANCIAL PERFORMANCE: The district typically outperforms the budget and achieves surplus results.
STATE FUNDING RELIANCE: The district relies on state funding for the majority of its operations. Sound reserves and cost containment measures help to mitigate the district's exposure to state funding uncertainties.
MIXED DEBT PROFILE: Overall debt is high, but its impact on the budget is manageable, reflecting state support for debt service. Well-funded pensions also reflect strong state support.
SOUND FINANCES DRIVE STABLE OUTLOOK: Fitch expects the district to maintain its sound financial profile to counterbalance concerns over high debt levels and below average wealth levels, credit factors that Fitch believes limit the rating to its current level in at least the near term.
The district encompasses 79 square miles in downtown
BROAD ECONOMY WITH MILITARY PRESENCE
The district benefits from its location within the broad and diverse city of
The district's median household income represents just 57.6% and the poverty level about double the U.S. average, a profile not dissimilar to other inner city districts. Fiscal 2014 taxable assessed valuation (TAV) per capita is a low
SOUND FINANCES DESPITE ENROLLMENT DECLINES AND STATE FUNDING CUTS
The district addressed financial pressure stemming from a recent history of declining enrollment and fiscal 2012-2013 biennium state funding cuts with school closures and leaner staffing levels. These expenditure cuts achieved significant savings and have allowed the district to consistently maintain structural balance.
The district completed fiscal 2013 with a
Fiscal 2013 unrestricted reserves of
ELEVATED DEBT; ONGOING CAPITAL NEEDS
Overall debt, including a sizable overlapping component, is high at 8.1% of fiscal 2014 market value. However, the district's debt service burden consumes a moderate 7.7% of fiscal 2013 governmental expenditures and a lower 5.6% of spending considering state support for debt service.
Fitch anticipates overall debt to remain elevated due to the district's ongoing capital needs. The district expects to largely complete its current capital program -- renovation of 21 schools -- by
The district established a commercial paper program in
Terms of the district's series 2014 VRULTs include three and four year initial fixed rate terms, a soft put back to bondholders in lieu of liquidity support and optionality to periodically reset the rate to a long-term fixed basis. Fitch believes this structure presents a manageable risk in terms of interest rate exposure. These offerings plus the commercial paper program capacity comprise 26% of the district's debt total.
Fitch estimates the district's variable rate debt to remain within the district's target of 30% based on issuance plans through fiscal 2015. Variable rate debt at the maximum target level would expose the district to a high level of interest rate risk, especially for a school district. Fitch therefore views this somewhat liberal policy with concern.
In the case of a failed remarketing for the series 2014 bonds, the district would face a risk of paying an elevated interest rate, expected to be capped at a fixed-rate ranging from 6%-8% as applicable to the district's outstanding VRDOs. The district maintains healthy reserves in its debt service fund (cash and investments totaling
MANAGEABLE CARRYING COSTS
The district participates in the Teachers Retirement System of
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
Source: Fitch Ratings
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