Fitch Affirms Kernville Union School District's (California) 2004A GOs at 'A-'; Stable Outlook

NEW YORK--(BUSINESS WIRE)--In the course of routine surveillance, Fitch Ratings affirms the 'A-' rating on Kernville Union School District's (the district), $3.3 million in general obligation (GO) bonds, series 2004A.

The 'A-' rating reflects the district's moderate debt levels and satisfactory financial management and fund balances, as well as the below average wealth levels, volatility associated with a resource and tourism-dependent economy, and fiscal uncertainty regarding statewide education funding and continued enrollment declines. While assessed value (AV) gains to date have been good, the district may see declines in the near future given high home foreclosure levels and the second-home nature of many properties.

The district is located in the northeastern portion of Kern County, California, almost 50 miles northeast of Bakersfield. The district encompasses a large 295 square miles in Kern River Valley, where it is boarded to the north by Sequoia National Forest. Enrollment, however, is small at only 895 students and has declined in recent years, and the district expects it to continue to drop until 2011, bottoming out at 835 students. The district experienced sound AV growth, averaging 5.1% per year over the last five years.

The district's economy is highly dependent on tourism, as evident during the summer when the district's population more than doubles with visitors to Lake Isabella, one of the largest reservoirs in Southern California. Kern County's economy is natural resource-based and is the largest oil-producing and third largest agricultural-producing county in the nation. Therefore, it experiences persistently high unemployment rates (11.5% for February 2004 and 14.7% for February 2008), and median household income is slightly below the state and national averages.

Financial operations are marked by slightly above average reserve levels at 5.6% of total expenditures for 2008, although operating deficits have occurred since 2006. The district has and expects to continue to make the cuts necessary to expenditures in order to maintain their fund balances and narrow or close the spending imbalance.

The district's overall debt levels are low to moderate at $1,922 per capita and 3.14% of market value, although they have risen markedly in recent years. Debt amortization is slow, and the district has a relatively large $6.5 million GO bonds authorization remaining. However, given that the district has no major identified capital needs and intends to use some of the authorization to redeem certificates of participation, the 'A-' rating reflects Fitch's expectation that the debt burden will remain affordable.

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