2008-06-13 22:51:23 -
- Fitch Ratings assigns its 'AA' underlying rating to $100 million of Austin Independent School District (AISD, or the district), TX' unlimited tax school (ULT) refunding bonds, series 2008, scheduled to sell competitively the week of June 23. Additionally, Fitch affirms its 'AA' rating on the district's $608.3 million outstanding ULTs. Bond insurance will be provided at the bidder's option.
The Rating Outlook is Stable.
The bonds are direct obligations of the district and are payable from an unlimited property tax levy on all taxable property located within the district. Bond proceeds will be used to construct new schools, renovate existing schools, acquire land for future schools, and to pay costs of issuance.
The 'AA' rating reflects the district's moderate debt levels and capital needs, above-average debt amortization, sound financial position, and healthy and expanding local and regional economies. Given its mature status, enrollment pressures appear manageable going forward. According to district staff, the major issue facing AISD is one familiar to most large, urban districts - significant wealth and testing disparities between campuses. While the district is considered property rich under state legislative definitions, pockets of low-income residents and underperforming schools continue to challenge administrators and teachers.
As projected, the district's financial reserves grew substantially in fiscal 2007 due to the adoption of four optional 'super pennies' in its maintenance and operations (M&O) tax levy. Further aided by ongoing cost-control measures and an increased state aid allotment for high school students, fiscal 2007 posted a large $63.6 million general fund surplus. As a result, its unreserved fund balance doubled to $120.6 million or nearly 17% of spending. Fiscal 2008 projections point to balanced or slightly positive results. In order to preserve its reserves, the addition of teacher pay hikes in the proposed fiscal 2009 budget will likely prompt a tax rate increase that would require voter approval in November 2008.
Fitch considers the district's debt level moderate and capital needs manageable. Given the relatively small enrollment growth of roughly 1% annually, the district's capital needs are geared primarily toward renovations and additions to existing facilities. With this issuance, overall debt ratios are little changed from previous levels at $2,252 per capita and 3.0% of taxable assessed valuation (TAV). District voters approved a $344 million bond authorization in May 2008 by large margins. Along with $163 million in remaining authorization from a 2004 referendum, the aggregate tax rate impact is anticipated to be modest. The principal pay out rate remains above average at 66% in 10 years, but below previously very rapid levels.
AISD serves the city of Austin (general obligation bonds rated 'AA+' by Fitch) and has a current enrollment of approximately 83,000. The Austin area economy is experiencing robust growth, characterized by employment growth, low unemployment, and ongoing commercial development, although homebuilding activity has softened somewhat. Due primarily to reappraisal, TAV surged by over $9 billion or 22% in fiscal 2008, further increasing TAV per capita to over $74,000. Local unemployment rates have declined steadily since peaking at more than 6% in 2003; the most recent monthly figure was 3.0% for April 2008. For the 12 months ending April 2008, the area's job growth totaled 2.7% with every sector posting gains except information and manufacturing.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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
Jose Acosta, +1-512 215-3726
Rebecca Moses, +1-512-215-3739
Christopher Kimble, +1-212-908-0226
(Media Relations, New York)
