Fitch Rates Amarillo Junior College District, Texas GO Bonds 'AA'

AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'AA' to Amarillo Junior College District (AJC or the district), Texas' $22 million general obligation (GO) bonds, series 2008. In addition, Fitch affirms the 'AA' rating on the district's outstanding $13.1 million GO bonds. The Rating Outlook is Stable.

Scheduled for a competitive sale on June 23, 2008, the bonds are direct obligations of the district, payable from an ad valorem tax levy within the limits prescribed by law. The maximum property tax rate for debt service is $0.50 per $100 taxable assessed valuation (AV). Proceeds will be used to construct, equip, and renovate district facilities and pay costs of issuance.

The 'AA' rating is based on historically steady growth in the district's enrollment and tax base, very low debt levels, and satisfactory financial performance. The district is competitively positioned in its broad service area with low tuition rates in comparison to other area institutions. The district's available taxing margin for both operations and debt service as well as its diverse revenue base provide additional financial flexibility. While district officials anticipate increased levels of enrollment over the near term, Fitch is concerned about the possible continuation of recent enrollment declines.

The district's taxing jurisdiction is coterminous with the City of Amarillo, which covers both Potter and Randall counties. Population growth in the larger Amarillo metropolitan service area (MSA) has been modest at approximately 1% annually since 2000 and now totals over 242,000 in 2007. Amarillo serves as the banking, distribution, and commercial center for the Texas Panhandle. The district's service area, which includes 26 counties, is estimated to total about 400,000. Steady commercial and residential development has enabled the city to maintain steady and notably low unemployment rates. Healthcare, education, food production and distribution are among the area's largest employers.

The district is a two-year, comprehensive, multi-campus community college system. Major capital programs were completed in the mid-1990's, and the lack of need for additional debt financing since then has resulted in a favorable debt profile and principal payout. Including this issuance, debt levels remain low and the pace of debt retirement is above average at about 58% retiring in 10 years. The current bond offering represents the first of three phases of a $68.3 million GO bond authorization approved by a substantial margin of voters in 2007. The remaining authorization is anticipated to be issued in 2009 and 2010. One of the most notable projects included in this authorization will be the construction of a new nursing and dental program facility. Additional projects include improvements and renovations to existing facilities for other demand-driven programs in the allied health sciences.

As do most community colleges, AJC offers open enrollment. Despite modest enrollment declines in the past two fall semesters that are reportedly comparable to other area institutions, overall student headcount has grown at an average annual growth rate of 5% in the fall semesters since fiscal 2002. District officials attribute the recent declines to a lower number of adult students enrolled in an improving economy. Student headcount totaled 13,200 in the fall 2007 semester, and increased enrollment levels are anticipated over the near term. AJC provides online and dual enrollment courses in 31 local high schools. The more distant Moore County and Hereford campuses allow the district to further reach students in their service area, and local residents in these areas additionally approved a branch campus maintenance tax that fully supports operations.

AJC has had generally positive operating results. Operating margins have trended upwards since fiscal 2004 to 5.1% in fiscal 2007. Revenue stability is enhanced by a diverse revenue stream that includes property taxes and tuition. The district remains primarily supported by state appropriations at 32% of total revenues in fiscal 2007, despite essentially flat funding levels. District officials anticipate closing fiscal 2008 with either break-even results or the addition of up to $500,000 to reserves. Liquidity levels are satisfactory, with AJC maintaining over three month's operations in available unrestricted funds.

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