Fitch Rates Crandall ISD, Texas' Bonds 'A-'; Outlook Stable
2009-01-30 17:55:03 -
Fitch Ratings assigns its 'A-' rating to Crandall Independent School District, Texas' (ISD, or the district) $2 million unlimited tax school building bonds, series 2009, scheduled to sell via negotiation the week of Feb. 2nd, 2009. Fitch also affirms the district's outstanding $49.2 million in unlimited tax bonds at 'A-'. The Rating Outlook is Stable.
The bonds are direct obligations of the district, payable from an unlimited annual property tax levy on all taxable property within the district. Bond proceeds will be used to pay cost over-runs related to the new elementary school under construction and school building renovations. The new elementary school is expected to open later in 2009.
The 'A-' rating reflects the district's consistently solid financial performance, the strong general fund balances levels, taxable assessed value (TAV) growth, and high debt levels. Enrollment growth has begun to slow within the district, reflecting the decline in building permits in the area. The district now expects that construction of a new elementary school or middle school will not begin until 2013, at the earliest.
The district is located in Kaufman County, approximately 25 miles southeast of Dallas. Due to ample and inexpensive land and its proximity to the Dallas-Ft. Worth metroplex, the county's population grew by 35% in 2000-2007 to over 96,000. The Dallas-Fort Worth metroplex area unemployment rate increased to 5.7% as of November 2008 from 4.1% as of November 2007. County wealth levels remain above state and national averages.
The district's trend of solid financial reserves was maintained in fiscal 2008 as evidenced by an $806,000 general fund surplus. Unreserved general fund balances totaled $5.2 million or 33% of spending in fiscal 2008. The district has a formal fund balance policy of 2 months of expenditures or 3 months, if possible. The fiscal 2009 operating budget is balanced after awarding 4.5% teacher pay raises; however, the school district currently expects a ($300K) deficit in fiscal 2009 due to cost over-runs related to a capital project.
The district experienced a sizable increase in population, student enrollment, and TAV due to the development of numerous master-planned residential communities, over the past three years. The largest development project, known as Heartland, totals 2,500 acres just outside the City of Crandall and is projected to be comprised of 8,000 residential units. Heartland has donated seven school sites to the district and signed a developer agreement that provides infrastructure assistance for future school construction, which reduces the district's capital requirements.
The construction at the Heartland development has slowed over the past year to 100 homes per year from 300-400 homes per year, reflecting the effects of the national economy. In addition, several other developments are now on hold or have been scaled back. Despite the slow-down as a result of this project and numerous other developments, TAV increased by 7% in fiscal 2008/2009.
In response to the surge in enrollment due to residential real estate development, voters approved a $50 million authorization in November 2007 for the construction of two new schools, building renovations, and technology upgrades. The $20 million offering in February 2008 resulted in a 75% increase in the district's general obligation debt levels. Debt levels currently are high at $3,610 per capita and 7.7% of TAV, after adjusting for 26% state support. Overall debt levels are also high at $4,580 per capita and 9.7% of TAV. The current offering is expected to have no tax rate impact, and the total tax rate is expected to remain at $1.48. Given the recent slow-down in development as well as flexibility in the district's capital program, issuance of the remaining $30 million authorization for another school will take place in 2013, at the earliest.
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
Andy Kaaz, 512-215-3730 (Austin)
Mark Campa, 512-215-3727 (Austin)
Cindy Stoller, 212-908-0526 (Media Relations, New York)
cindy.stoller@fitchratings.com
