Fitch Rates Madison Parish Sch Bd, LA GOs 'BBB'

AUSTIN--(BUSINESS WIRE)--Sept. 29, 2005--Fitch Ratings assigns an initial 'BBB' rating to the Madison Parish (Louisiana) School Board (the district) $18.5 million general obligation bonds, series 2005. The bonds are scheduled for a competitive sale on or about Oct. 17. The district's financial advisor is Sisung Securities in New Orleans. The Rating Outlook is Stable.

The GO bonds are direct obligations of the district, payable from an unlimited ad valorem tax levied against all taxable property in the district. Proceeds will be used to finance the construction of new school buildings and the acquisition of equipment therefore. According to district officials, the area received no significant damage during Hurricane Katrina, with notable damage to only one portable school building.

The 'BBB' rating reflects above-average operating reserve levels and a generally level tax rate. Also factored into the ratings are uneven growth rates in both tax base and sales tax receipts, a high direct debt burden, tax base concentration, and a limited economy. The current administration reportedly is attempting to correct an imbalance between operating revenues and outlays that has emerged the past two fiscal years; the outcome of these efforts will be a key consideration for Fitch in future reviews of this credit. Bond proceeds, along with proceeds of an upcoming sales tax bond offering, will be used to finance the construction of a new senior high school and junior high school.

The district's financial profile is satisfactory, although the general fund has posted operating deficits the past two fiscal years as expenditure growth has outpaced increases in revenues. For fiscal 2004, the general fund recorded an operating shortfall of $716,000 and a net loss of $1.4 million after including transfers out for capital spending. The fund balance for the year was $3.6 million, or nearly 30% of spending and transfers out. While healthy, this total was down markedly from balances of roughly 40% or more reported the previous three fiscal years. District officials expect another, albeit smaller drawdown of reserves for fiscal 2005. The district's primary sources of operating revenues are state programs (more than 80% of revenues in fiscal 2004), receipts from an existing 1.5% sales tax (12%), and property tax revenues (4%).

Tax base growth has been uneven in recent years. Taxable assessed valuation (TAV) grew less than 2% for fiscal 2005 to roughly $45 million. This increase followed declines of between 1.0%-1.5% each of the two previous years. Sales tax receipts also have declined recently, posting a nearly 5% drop in fiscal 2004 to $1.4 million. This drop followed two years of gains of at least 7%. Another negative credit consideration is enrollment; the student population appears to have stabilized after declining for four consecutive years; the current student total is roughly 2,400. However, district officials are hopeful that the new junior and senior high schools will attract new students.

The GO bonds and the proposed sales tax bonds were authorized by district voters in November 2004. The projected 28 mills levy for the GO bonds is well below the amount conveyed to voters prior to the election. Direct debt levels for the district are above average, and the rate of principal retirement is slow. The district reportedly has no additional borrowing plans beyond these two transactions.

The parish economy is anchored by Mississippi River commerce and agriculture; healthcare also plays a prominent role. Three of the four largest taxpayers in fiscal 2004 were barge companies, reflecting the importance of that industry. Taxpayer concentration is a credit concern -- the top 10 taxpayers in fiscal 2004 comprised more than 30% of total assessed valuation, which is much higher than average. The parish unemployment rate historically has been well above state and national averages. The most recently available monthly data shows a continuation of this pattern; the August 2005 parish rate of 8.7% was much higher than the state (6.0%) and national (4.9%) averages for the month.

Madison Parish is located in northeast Louisiana along the Mississippi River. The 2004 estimated parish population of approximately 13,000 is down slightly from the 2000 census total and also down from the 1970 and 1980 census totals of more than 15,000. Local wealth levels are below state and national averages.

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