AUSTIN, Texas - (Business Wire) In the course of routine surveillance, Fitch Ratings affirms its underlying 'A+' ratings on the following United Independent School District, Texas' (the district) debt obligations: --Approximately $255.8 million in outstanding general obligation unlimited tax (GOULT) school building bonds, series 2006 and earlier;
--Approximately $14 million in public property finance contractual obligations (limited tax), series 2005 and earlier; and
--Approximately $930,000 in tax maintenance notes, series 2002 (limited tax).
While Fitch considered the following GOULT bonds in its analysis and previous commentaries, the following rating history was not reflected on Fitch's web site:
--GOULT school building bonds, series 1993-A;
--GOULT school building and refunding bonds, series 1998;
--GOULT school building bonds, series 1999;
--GOULT school building bonds, series 2000;
--GOULT school building bonds, series 2001.
In addition, Fitch assigns an 'AAA' rating on the series 1993-A, 1998, 2000, and 2001 bonds based on a guaranty provided by the Texas Permanent School Fund, whose Insurer Financial Strength is rated 'AAA' by Fitch. The full rating history is now available on Fitch's web site at 'www.fitchratings.com'. The Rating Outlook is Stable.
The 'A+' rating reflects the maintenance of solid financial reserves despite ongoing operating challenges brought on by enrollment growth, steady gains in taxable assessed values (TAV), and an expanding area economy. While debt ratios are moderate, aided by state support for a portion of the district's debt service, large capital needs remain. Enrollment and tax base growth have slowed with the ongoing recession and borrowing plans have been pushed back several years. Maintenance of adequate reserves remains a key rating driver, given anticipated growth in enrollment and sizable capital needs.
The district serves an estimated population of 150,000 and comprises the northern and southeastern parts of the city of Laredo (GO bonds rated 'AA-' Stable Outlook by Fitch) and three-quarters of Webb County (GO bonds rated 'A+' by Fitch), encompassing 2,400 square miles. TAV growth continues to record gains, albeit at a slower clip in recent years. From fiscal 2006-2009, TAV grew on average by 13.4% annually; however, fiscal 2010 TAV increased by a modest 1.5%, with district projecting similar rates of growth for the next several years. Enrollment growth has also moderated recently, increasing 2.8% in 2009, down from the 3.6% increase recorded in 2008.
Located on the Rio Grande, the border city of Laredo serves as the principal port of entry into Mexico and the largest inland port in the U.S. Over the last decade, Laredo has experienced substantial population growth. Laredo's proximity to Mexico, an economic base focused on trade and transportation, closely ties its economic health to its southern neighbor. Trickle-down effects of fluctuations in the value of the peso and dependence on international policies potentially create economic uncertainty for the area. Recent integration of the U.S. and Mexican economies through free trade agreements and Laredo's essential transportation network has added stability. Although the area is not immune to the ongoing recession, city unemployment rates remain below national averages, with the August 2009 rate at 8.4% compared to the U.S. rate of 9.6%. In addition, the labor force continues to grow, increasing 4.7% from the same period last year.
Financial performance remains favorable, with the district posting consecutive general fund operating surpluses since 2001. For the close of fiscal 2008, the general fund balance stood at $71.6 million or 25.6% of expenditures and transfers out. The undesignated reserve represented a solid 16.4% of expenditures and transfers out. For the close of fiscal 2009, officials anticipate a $10 million increase to the undesignated balance, with a $3.3 million operating surplus budgeted for fiscal 2010.
Despite substantial issuance to meet the demands of a growing enrollment, the district's debt ratios are moderate, reflecting tax base and population expansion as well as sizable debt service support by the state. The 10-year payout on all outstanding debt is approximately 50%. After the defeat of a $400 million bond election in 2007 and the weakened economy, the district has pushed back its borrowing plans for several years, focusing instead on alternative funding sources including pay-as-you-go financing for some of its capital requirements. However, major borrowing needs remain given projected continued growth in enrollment.
Additional information is available at www.fitchratings.com.
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Fitch Ratings, Austin
Mark Campa, 512-215-3727
Jose Acosta, 512-215-3726
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com
