Fitch Affirms Jurupa Unified School District, CA, GOs at 'AA-'; Outlook Stable

SAN FRANCISCO--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'AA-' rating on the following Jurupa Unified School District, CA (Jurupa USD, or the district) debt:

--$54 million of general obligation (GO) bonds.

The Rating Outlook is Stable.

RATING RATIONALE:

--Financial management is strong, as shown by the maintenance of adequate fund balances and spending discipline in a period of fiscal and economic stress.

--The district is dependent on the state of California for funding, requiring it to manage through significant revenue volatility and uncertainty.

--Moderate enrollment declines create additional revenue pressures.

--The school district's large, diverse tax base is under stress due to a severe regional housing market downturn; however, the pace of decline appears to have diminished.

--The district is part of a larger and diverse Riverside County regional economy that is suffering a deep cyclical downturn and has yet to recover.

--Debt levels are very low, and the district has no plans to issue more debt in the near term.

KEY RATING DRIVERS:

--Continued strong financial management, balanced operations and maintenance of at least the current fund balance levels.

SECURITY:

The bonds are backed by an unlimited ad valorem property tax.

CREDIT SUMMARY:

Jurupa USD has managed well through a period fiscal and economic distress. The district's finances remain healthy, with an unreserved fund balance equal to 8.7% of expenditures and a total fund balance of 11.8% at the end of fiscal 2010. The district's unreserved fund balance has roughly doubled over the past three years, while total fund balance remained steady, reflecting state policy changes that gave the district more discretion of categorical funding. Current year operations are projected to be balanced.

The district has managed significant declines in state revenues through disciplined reductions in spending, including reductions in teaching staff and use of unpaid furlough days. The district cut expenditures by 7.7% in fiscal 2010. The district will have to make significant further expenditure reductions if state revenues do not rebound as federal stimulus measures expire. It could be forced to make even larger reductions if California voters do not approve tax measures necessary to maintain current funding levels. While the revenue environment is uncertain, the district has exhibited a willingness and ability to align expenditures with revenues to maintain adequate financial margins.

Jurupa USD is a Riverside County, California, school district that serves a population of about 112,000 residents and 20,000 students. The district includes about 44 square miles of unincorporated territory immediately northwest of the city of Riverside. The region has been among the hardest hit in the nation by the national housing downturn, and the local housing market remains extremely stressed with above-average foreclosures and delinquencies.

The district's tax base has suffered significant declines in assessed value (AV) but has held up somewhat better than other areas of Riverside County due to the maturity of its tax base. District AV dropped 6.5% in 2010 and 3.4% in 2011. Countywide, AV dropped 10.4% in 2010 and 5.8% in 2011. Downside risks remain and further declines are likely. Still, the district's tax base remains large and diverse, and AV declines have little impact on financial performance because the state education funding formula offsets changes in local property tax revenues with changes in state funding. The district's debt burden is quite small relative to the tax base with direct debt at just 1% of AV. Total direct and overlapping debt is also very low at about $900 per capita or 1.3% of AV.

Jurupa is part of a large and diverse economy that is under significant stress. The housing downturn and national recession pushed Riverside into a deep economic decline that has slowed but not yet reversed. Riverside County's unemployment rate was 14.2% in December 2010, essentially unchanged from a year earlier and well above the state and national averages. The county added jobs in each of the final three months of 2010 compared to year earlier levels, the first year-over-year gains since 2007. Despite tentative signs of job growth, Fitch views the region's economy as fragile and expects the return to former peak levels of employment and economic activity to be a protracted process. Over the longer term, the region's economy benefits from its proximity to the large and dynamic Los Angeles and Orange County economies. The region's vital logistical, trade and transport industry has significant strengths and is likely to grow over time.

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

In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc., and IHS Global Insight.

Applicalbe Criteria and Related Research:

'Tax-Supported Rating Criteria', dated Aug 16., 2010.

'U.S. Local Government Tax-Supported Rating Criteria', dated Oct. 8, 2010.

For information on Build America Bonds, visit www.fitchratings.com/BABs.

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566

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.