Fitch Affirms White Settlement ISD, TX's ULT Bonds at 'A+' Underlying; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings takes the following rating action on White Settlement Independent School District, TX's (the district) unlimited tax (ULT) bonds as part of its continuous surveillance effort:

--Approximately $180.3 million ULT bonds underlying rating affirmed at 'A+'.

The Rating Outlook is Stable.

RATING RATIONALE:

--The district has maintained healthy financial operations and adequate general fund balance reserve levels amid a high enrollment growth environment.

--Debt levels are high and amortization is slow.

--Previously very rapid enrollment growth has subsided to a moderate pace, resulting in more manageable capital needs in the near-term.

--The district has experienced strong taxable assessed value (TAV) growth, but a modest decline is anticipated for fiscal 2011 reflecting the weakened housing market.

--The district benefits from its location within the broad economic base of the Fort Worth metropolitan area mitigating some concern over concentration in one major employer.

KEY RATING DRIVER:

--Healthy general fund reserves are needed to offset the financial pressures associated with enrollment growth and may mitigate some credit concern of the high debt burden over time.

SECURITY:

The bonds are secured by an unlimited ad valorem tax pledge of the district.

CREDIT SUMMARY:

The district's financial performance remains favorable despite the increased costs associated with enrollment growth. Fiscal 2009 results show a slight deficit of nearly $540,000, decreasing the undesignated general fund balance to $4.8 million or 12% of expenditures and transfers out. The modest deficit was primarily attributable to lower than projected state and local revenues received; commensurate expenditure reductions were taken to partially offset the revenue shortfall. District officials expect break-even operating results for fiscal 2010. The district anticipates adopting a balanced budget for fiscal 2011 by the end of August. Although not a formal commitment, the district has made the goal of achieving a general fund reserve of at least 90 days of spending as a high priority in its strategic plan.

Debt levels are high and principal amortization is slow, due to the district's previously accelerated student growth environment and its need to meet facility demands while limiting the effect to existing taxpayers. The district's direct debt burden on a per capita basis is high at approximately $4,440 per capita and 8.2% as a percentage of market value, even after adjusting for state support for 19% of the district's outstanding debt. Overall debt levels are higher at nearly $5,060 per capita and 9.4% of market value. The slow pace of principal repayment (at less than 20% in 10 years) reflects the historical use of capital appreciation bonds. Due to slower enrollment growth projected in the near to intermediate term and available capacity, the district has no immediate debt and capital needs.

Located west of Fort Worth, the district serves a student population of approximately 6,000 in primarily residential communities of west Tarrant County. As the level of residential development activity slows in the district, enrollment growth continues although at a somewhat moderated pace compared with prior years; previously rapid enrollment gains of 4%-6% have declined to 3%-3.5% per year, with this lower level of growth expected to continue. Although the district's primarily residential tax base has grown by an annual average of nearly 12% since fiscal 2006, a modest decline is anticipated for fiscal 2011 reflecting the weakened housing market. The Fort Worth metropolitan employment base is extensive, and while military-related spending still accounts for an estimated one-quarter of the economy, recent gains in other sectors, such as services, construction, and trade, have helped diversify the labor force. In addition, the presence of the mining (oil), cattle, and manufacturing sectors, high tech, education, and aerospace have emerged as significant components of the Fort Worth economy. The city of White Settlement (the city), a part of the Fort Worth area economy and located within the district, has not been immune to the effects of the current economic downturn, evidenced in the rise in unemployment rates. For April 2010, the city's unemployment equaled 8.2%, up from 6.9% a year ago. Unemployment within the city is consistent with metropolitan and state rates but below the national average of 9.5%. Despite the city's rising unemployment, the labor force grew by a solid 3.1% between April 2009 and April 2010.

Applicable criteria available on Fitch's website at 'www.fitchratings.com':

'Tax-Supported Rating Criteria,' dated Dec. 21, 2009.

'U.S. Local Government Tax-Supported Rating Criteria', dated Dec. 21, 2009.

Additional information is available at 'www.fitchratings.com'.

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