Fitch Rates New Braunfels ISD, Texas' ULT Bonds 'AA-'; Upgrades Outstanding

2008-08-06 23:50:05 -

- Fitch Ratings has assigned an 'AA-' underlying rating to New Braunfels Independent School District, Texas' (New Braunfels ISD or the district) $17 million unlimited tax (ULT) school building bonds, series 2008. In addition, Fitch upgrades to 'AA-' its underlying rating on the district's $97.3 million in outstanding unlimited tax bonds. The series 2008 bonds are scheduled for a negotiated

sale on August 16, 2008. The Rating Outlook is Stable.

The bonds are direct obligations of the district, payable from and secured by an unlimited property tax levied against all taxable property within the district. Proceeds will be used for construction, renovations and equipment of school buildings, making site and technology infrastructure improvements, site acquisitions, and to pay issuance costs.

The upgrade to 'AA-' reflects the district's consistent positive operating results that have enabled the district to increase general fund balance reserves substantially despite enrollment growth pressures and implementation of a new state school funding formula. The rating also reflects the district's strong tax base growth, high debt burden with additional capital needs, and a slightly below average debt amortization. The district's conservative financial practices and historical operating trends suggest that the district will be able to maintain its financial profile satisfactorily over the near term.

Located 30 miles north of San Antonio, the district encompasses 75 square miles and serves primarily the City of New Braunfels. The local economy centers on tourism, manufacturing, distribution, and retail trade. Proximity to the extensive employment base of the San Antonio metropolitan area provides additional job opportunities. Enrollment, currently around 7,200 students, has grown at an average annual rate of 3.3% over the past five years. Outpacing enrollment growth, TAV increased by a compound average annual rate of 10.5% during the same period. Despite a moderate slowdown of new home starts, the district's enrollment and TAV are expected to continue to expand, given the ongoing northern expansion of San Antonio and the availability of affordable land within the district.

District financial operations are sound. The district has consistently reported positive operating results since 1999, steadily increasing its unreserved general fund balance reserves to a solid $19.3 million, or nearly 47% of spending by the end of fiscal 2007. For fiscal 2008, the district expects to add about $1.5 million to fund balance reserves and has adopted a balanced budget for fiscal 2009. The fiscal 2009 budget includes the opening of a new elementary school, conversion of a sixth grade center to a middle school, teacher pay raises and attendance incentives. The district expects to draw down its general fund balance to purchase land for future school sites, but plans to maintain unreserved general fund balance reserves consistent with its informal target of 18%.

District debt ratios are high even after factoring in state support for a portion of existing debt service. Debt amortization is slightly below average with 45% of principal maturing in ten years. Reflective of the district's informal policy to structure debt repayment with a maximum 20 year maturity, debt service carrying charges are high at 17%. Although the debt ratios are high, the debt burden is manageable and expected to remain so given the amortization schedule of existing debt and the fact that the current bond program is expected to accommodate the district's needs for the next four to six years. After issuance of these bonds, the district will not have any authorization remaining. The district recently formed a committee to assess the district's future capital needs at the secondary grade levels, but does not expect to return to the voters for additional bond authorization in the next 12 months.

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Fitch Ratings, Austin
Gabriela Quiroga, 512-215-3731
Rebecca Moses, 512-215-3739
or
Media Relations:
Cindy Stoller, 212-908-0526, New York