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Fitch Rates New Braunfels ISD, TX ULTs 'AAA' PSF; 'AA' Underlying; Outlook Stable
Posted February 12, 2012
We Recommend...
AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AAA' rating to the following New Braunfels Independent School District, Texas' (the District) unlimited tax (ULT) bonds:
--$26.23 million school building and refunding bonds, series 2012.
The 'AAA' rating is based on a guaranty provided by the Texas Permanent School Fund (PSF) which is rated 'AAA' by Fitch. Fitch has also assigned an underlying 'AA' rating to the 2012 bonds.
The bonds are expected to price via negotiation as early as Feb. 16, 2012, pending market conditions. Proceeds from the sale of the bonds will be used in the construction of school buildings and renovations to existing facilities and to refund a portion of the District's currently outstanding obligations and to pay issuance costs.
In addition, Fitch affirms approximately $118.7 million in outstanding District ULT bonds (pre-refunding) at 'AA'.
The Rating Outlook is Stable.
SECURITY
The bonds are secured by an unlimited ad valorem tax pledge of the District. In addition, the bonds are secured by the Texas PSF guarantee.
KEY RATING DRIVERS
STRONG FINANCIAL PROFILE: Conservative fiscal management has consistently produced positive operating results in each of the last five fiscal years, increasing the unreserved general fund balance to very strong levels.
TAX BASE EXPANSION: Residential and commercial development has picked up in the District resulting in tax base growth in fiscal 2012 of 8.5% over the prior year, reversing a modest one-year dip in taxable assessed valuation (TAV).
MANAGEABLE DEBT BURDEN: The District's above-average debt burden reflects the accelerated enrollment growth and facility construction of the last five fiscal years, but it is mitigated by the District's favorable wealth profile.
FAVORABLE ECONOMY: The District's economic base benefits from its location in the San Antonio metropolitan area. Income levels remain above average and local unemployment levels compare favorably to state and national averages.
CREDIT PROFILE
ECONOMY SUPPORTED BY PROXIMITY TO SAN ANTONIO
Located 30 miles north of San Antonio, the District encompasses 75 square miles and serves primarily the city of New Braunfels (the city). The local economy centers on tourism, manufacturing, distribution, healthcare, and retail trade. The city's location and access to the extensive economic bases of both San Antonio and Austin offers residents additional employment opportunities; this is reflected in the area's historically low unemployment rates.
For December 2011, the city's unemployment rate stood at 5.6%, slightly below the 5.8% recorded from the prior year at this time, but well below the rates of the city of San Antonio (6.8%), the state (7.2%), and nation (8.3%). In addition, the labor force grew 0.6% during this same period. The District's current population is estimated at 44,450, and has shown an average annual increase of nearly 5% since 2005. Wealth indices are above average.
ENROLLMENT GROWTH CONTINUES; TAV GROWTH SLOWING
Enrollment also continues to record steady gains, averaging 3.4% annually from 2006-2012. Outpacing enrollment growth, TAV increased by an average of more than 7% annually during the same period. Moderation in values of existing properties and a slowdown in new home starts contributed to a decline of approximately 1% in fiscal 2011 TAV to $2.9 billion. However, the District's tax base expanded for fiscal 2012 due to accelerated commercial and residential development in the area, resulting in a notable TAV increase of 8.5% to $3.15 billion.
Management anticipates additional increases in student count and TAV going forward, given the ongoing northern expansion of San Antonio as well as the availability of affordable land within the District. Given the District's recent enrolment and tax base history, Fitch considers this expectation reasonable.
STRONG FINANCIAL FLEXIBILITY
District financial operations remain sound, despite pressures associated with enrollment growth. The District has consistently reported positive operating results since 1999, steadily increasing its unreserved general fund balance to a substantial $28.7 million, or approximately 60% of spending at the end of fiscal 2011. Break-even results or a modest drawdown are expected for the close of fiscal 2012.
While some drawdown of reserves may occur in the future, the District plans to maintain general fund balances consistent with its informal target of three months of operations. In addition, unlike many school Districts in the state, New Braunfels ISD maintains some operating tax margin, providing additional financial flexibility.
ABOVE-AVERAGE DEBT BURDEN
District debt ratios are above average, but have come down from previous levels due to ongoing population and tax base expansion. Overall debt ratios stand at about $4,800 debt per capita and 6% of market value. Payout is slightly below average at 43% repaid in 10 years, reflecting the prior issuance of capital appreciation bonds.
The current offering of $26.2 million will be used to fund the construction of a new middle school that will help alleviate overcrowding at the high school, to construct a new district transportation facility, to renovate existing school buildings, and to refund a portion of the District's currently outstanding debt. Officials do not expect any tax rate impact based on what Fitch considers reasonable TAV growth assumptions.
The operational impact of the new school is expected to be limited, since existing personnel will provide the bulk of staffing needs for the new facility. The debt burden is expected to remain manageable, given the amortization schedule of existing debt, anticipated population and tax base growth, and moderate capital needs.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com, National Association of Realtors, Underwriter, Bond Counsel, Underwriter Counsel, Trustee, and the Municipal Advisory Council of Texas.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 15, 2011);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).
Applicable Criteria and Related Research:
Tax-Supported Rating Considerations for 2010
http://www.fitchratings.com/creditdesk/report...
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/report...
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