Published: March 12, 2010
Fitch Rates Bridgeport ISD, Texas' ULT Rfdg Bonds 'AAA'; Upgrades Underlying; Outlook Stable
AUSTIN, Texas - (BUSINESS WIRE) - Fitch Ratings assigns an 'AAA' rating to Bridgeport Independent School
District, Texas' (Bridgeport ISD, or the district) approximately $15
million unlimited tax school building bonds, series 2010, based on a
guaranty provided by the Texas Permanent School Fund (PSF), whose
Insurer Financial Strength (IFS) is rated 'AAA' by Fitch.
Fitch also assigns an 'A+' underlying rating to the series 2010 bonds.
The bonds are expected to sell via negotiation on April 1, 2010.
In addition, Fitch upgrades $18.6 million in outstanding unlimited tax
bonds to 'A+' from 'A'.
The Rating Outlook is Stable
RATING RATIONALE:
--The upgrade reflects the district's increased and substantial fund
balance reserves, built up over the last three years despite the
challenges it faced with implementation of a new school funding formula
in Texas. Fitch believes the district's strong fund balance policy will
keep reserves at above-average levels.
--The district's tax base is concentrated with the top ten taxpayers
comprising 33% of the tax base. However, the capital intensive nature of
the properties on the tax rolls and output demand from the energy sector
combined with the district's high reserve levels somewhat mitigate
concerns over the tax base concentration.
--Tax base growth has been very strong over the last five years but is
anticipated to slow in the near term. While still high, taxpayer and
sector concentration have declined slightly.
--The district maintains fairly stable enrollment with minimal growth
pressures.
--With the issuance of new debt, district debt levels are more moderate,
but remain very manageable as the district's debt service tax rate
compares favorably to peer school districts. Amortization is slightly
below average.
RATING DRIVERS:
--Continued evidence of commitment by the largest taxpayers to their
facilities located in the district.
--Maintenance of tight budgetary controls to preserve its historically
solid financial performance is essential to the rating.
SECURITY:
The bonds are secured by a guaranty of the Texas PSF and are a general
obligation of the district payable from and secured by the proceeds from
an unlimited tax levied against all taxable property within the district.
CREDIT SUMMARY:
Located in largely rural Wise County, Bridgeport ISD encompasses about
146 square miles and has a population of about 12,000. County wealth
levels as measured by median household income are above state and
national levels, but per capita indicators are below average. District
enrollment, currently at about 2,300 students, has remained relatively
stable and has grown on average about 1% annually. Natural gas
production from the Barnett Shale and other affiliated industries
dominate the local economy along with a sizable new electric utility
plant. While historically below state and national rates, the county's
unemployment rate has risen sharply throughout 2009 and at 8.7% in
December 2009 exceeds the state and national rates, but has improved
from the 9.9% reported for August 2009.
Gains in the tax base typically have been very strong, averaging nearly
10% annually over the past five years, primarily due to expansion of
activity in the Barnett Shale. However, fiscal 2010 taxable assessed
valuation (TAV) grew at a more modest pace of about 5% from the prior
year, reaching nearly $1.3 billion. Tax base and sector concentration
has declined slightly but remains high at about 32% of TAV in fiscal
2010. The top two taxpayers, Wise County Power Plant (owned by Suez
Energy Generation) and Devon Gas Services, contribute a substantial 21%.
Finances are a strong credit positive; the district's unreserved fund
balance levels have doubled over the past five fiscal years, building up
reserves to a solid $11.4 million, or a very high 63.5% of spending by
the close of fiscal 2009 (up from $4.9 million, or 31% of spending in
fiscal 2004). Under the existing school finance formula, the district
currently is considered property rich, subject to wealth equalization
under state legislative definition, although annual recapture payments
remain minimal. Liquidity is also solid at $13 million in cash and
investments of over eight months of annual expenditures. The fiscal 2010
budget is balanced but management budgets conservatively and is
anticipating adding another $1.5 million to fund balance by the close of
the fiscal year.
With the current offering, overall debt levels rise to a moderate level
but remain very manageable given the district's favorable debt service
tax rate as it compares with peer school districts. Overall debt levels
approximate 3.5% of TAV or about $4,300 per capita. This bond sale was
authorized by a close margin of district voters at an election held in
November 2009. The proceeds will be used for classroom additions to the
high school and intermediate school. These capital improvements are
projected to meet the district's capital needs for the next 10-15 years
at current enrollment growth levels. With the new debt, which is being
amortized over 20 years, the district's 10-year principal amortization
rate drops to below average at 43% (from 57% of the currently
outstanding obligations).
Applicable criteria available on Fitch's website at www.fitchratings.com
include:
--'Tax-Supported Rating Criteria' (Dec. 21, 2009).
--'U.S. Local Government Tax-Supported Rating Criteria' (Dec. 21, 2009).
--'Revenue-Supported Rating Criteria' (Dec. 29, 2009).
--'State Revolving Fund and Municipal Loan Pool Rating Guidelines'
(April 28, 2008).
Additional information is available at www.fitchratings.com.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE.
Fitch Ratings, Austin
Gabriela Gutierrez, +1-512-215-3731
Steve
Murray, +1-512-215-3729
or
Cindy Stoller, +1-212-908-0526
(Media
Relations, New York)
cindy.stoller@fitchratings.com
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