SAN FRANCISCO--(BUSINESS WIRE)--Fitch Ratings has affirmed the following ratings for Placer Union High School District, CA (the district):
--$46.9 million general obligation (GO) bonds, 1999 series B & C, at 'AA';
--$1 million certificates of participation (COPs) series 2003 at 'AA-'.
The Rating Outlook is Stable.
SECURITY
The bonds are payable from an unlimited ad valorem tax on all taxable property within the district. The COPs are payable from lease payments subject to annual appropriation by the district.
KEY RATING DRIVERS
HEALTHY FINANCIAL POSITION: The district benefits from strong unrestricted fund balances, historically balanced financial operations, and solid liquidity levels. Improved state funding and conservative financial practices at the district are expected to maintain the district's healthy financial position over the medium term.
MANAGEABLE LONG TERM LIABILITIES: Long-term liabilities are manageable with relatively low debt ratios, no additional debt issuance plans, and sufficient financial flexibility to absorb rising pension contributions.
RECOVERING TAX BASE: The district's taxable assessed value (AV) increased moderately in fiscals 2014 and 2015. While fiscal 2015 AV remains slightly below the peak value reached in fiscal 2009, AV is expected to continue to increase at a modest pace given the improving real estate market and some on-going development within the district.
ECONOMIC IMPROVEMENT: The Placer County (the county) economy has improved notably over the past several years with an unemployment rate around the national average and a healthy employment growth rate. In addition, income levels within the district are above average and the population remains stable, although district enrollment continues to decline at a modest rate.
APPROPRIATION RISK: The 'AA-' rating on the COPs reflects the district's general creditworthiness, appropriation risk, and the essentiality of the leased asset (Colfax High School).
RATING SENSITIVITIES:
The rating is sensitive to shifts in fundamental credit characteristics including the district's strong unrestricted fund balances and prudent financial practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
CREDIT PROFILE
Located about 40 miles northeast of Sacramento, the district encompasses approximately 990 square miles and includes the cities of Auburn, Foresthill, Loomis, Meadow Vista, Colfax, and many unincorporated areas of Placer County. The district serves approximately 4,040 students.
HEALTHY FINANCIAL POSITION
The district's financial position remained healthy at the end of fiscal 2014 with a strong unrestricted general fund reserve, consistently balanced operating performance, and solid liquidity. At the end of fiscal 2014, the district's unrestricted reserve amounted to approximately $16.2 million or 41.4% of spending.
Conservative budgeting practices resulted in operating surpluses (after transfers) from at least fiscal 2008 through fiscal 2013. A deficit (after transfers) in fiscal 2014 of approximately $786,000 (2% of spending) was largely driven by increased transfers to internal funds for deferred maintenance and capital projects. While these transfers are expected to continue (at a reduced level) through fiscal 2017, the district's fund balance and financial performance are expected to remain strong for the rating.
DECLINING AVERAGE DAILY ATTENDANCE
The district has a multiyear trend of decreasing average daily attendance (ADA). Fiscal 2014 ADA was 4,040, which is 6.3% below fiscal 2009 levels. Modest annual declines are expected over the next few years.
Fitch views the declining ADA trend as manageable for the district. The improvement in state funding has generally offset the revenue loss attributed to fewer students over the past couple of years. While future revenue growth will be constrained, in part, due to the ADA decline, this is offset to some degree by additional sources of budgetary flexibility, including the ability to increase class sizes.
MANAGEABLE LONG TERM LIABILITIES
Overall debt levels for the district are low at $1,467 per capita and 1.2% of AV. The district does not plan on issuing any additional debt over the next several years as capital, and deferred maintenance needs are expected to be met from general operations and reserves.
The district participates in two statewide pension plans: CalPERS for classified staff and CalSTRS for teachers. Increased contribution rates for both plans have been announced with the expected change for the district amounting to an additional cumulative increase of around $800,000 (2.3% of fiscal 2014 spending) from fiscal 2015-2017. Fitch views the increase as manageable for the district and notes that the additional expenditures are included in the district's financial projections.
The district offers other post-employment benefits (OPEB) and funds its liability on a pay-as-you-go basis. Total contributions in fiscal 2014 amounted to $149,000 or 0.4% of general fund spending. The unfunded actuarial accrued liability of $2.6 million is low at 0.02% of AV.
TAX BASE GROWTH RETURNS
The district's AV returned to growth in fiscals 2014 and 2015 with increases of 4.5% and 5.3%, respectively. The gains are expected to continue although potentially at a reduced rate as the improving real estate market and ongoing development within the district support AV growth. The district's fiscal 2015 AV remained approximately 0.9% below the previous peak reached in fiscal 2009.
ECONOMIC IMPROVEMENT
The state's capital, Sacramento, serves as the primary economic center for this largely residential area. Financial improvements at the state level and a generally improving economic trend have led to a trend of solid employment growth in the county since 2011. The county's unemployment rate of 5.8% (September 2014) was approximately equal to the national average and below the state (6.9%).
The district's income levels are above average with per capita income 24% above national levels.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=961135
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