AUSTIN, Texas - (Business Wire) Fitch Ratings assigns an 'AAA' rating to the Bryan Independent School District, Texas' (BISD, or the district) $28 million unlimited tax school building bonds, series 2008, based on a guaranty provided by the Texas Permanent School Fund (PSF), whose insurer financial strength is rated 'AAA' by Fitch. In addition, Fitch has also assigned an underlying 'AA-' rating to the series 2008 bonds and affirms the underlying 'AA-' rating on the district's approximately $137 million in outstanding unlimited tax bonds. The Rating Outlook is Stable.
Scheduled for a negotiated sale Nov. 20, 2008, the bonds are direct obligations of the district, secured by an unlimited ad valorem tax levied against all taxable property within the district. The bonds are further secured by the Texas PSF guaranty. Proceeds will be used to finance various school facility projects and pay issuance costs.
The underlying 'AA-' rating reflects Bryan ISD's solid financial position, very healthy, ongoing tax base growth, and manageable enrollment increases. Historically sizeable reserve levels coupled with conservative financial management have allowed the district additional financial flexibility to substantially support various capital projects. In assigning this rating, Fitch also considered that overall debt levels are moderately high and amortization is below average. Although the local economy is somewhat limited, the area's economic underpinnings remain strong and include an historically stable employment base of government, health care, and education. The district's ability to manage expenditures and maintain solid reserves will be integral to maintaining credit quality.
Bryan ISD is located in Brazos County, approximately 90 miles equidistant from Houston and Austin. The district serves the city of Bryan, which is part of the larger College Station-Bryan metropolitan statistical area (MSA), and a surrounding, predominately rural 459-square-mile area. With its roughly 55,000 students, the large, flagship campus of the Texas A&M University System in College Station drives much of the local economy. The dominant governmental sector and large university student work force have contributed to below-average income levels, cost-of-living, and unemployment rates. While the tax-base composition is weighted toward the residential sector, taxable assessed valuation (TAV) has made gains of almost 10% annually over the past five years, and continues to outpace student enrollment growth. The district has experienced sporadic enrollment growth with modest gains overall that average not quite 2% annually for the past five years with 1% growth anticipated annually over the near term. Now at slightly more than 15,000 students, district officials attribute better than anticipated enrollment gains so far in fiscal 2009 to both facility and program enhancements.
Audited results for fiscal 2007 continued the district's trend of positive financial performance. Liquidity remained substantial with cash and investments totaling $31.4 million, equal to 112 days of cash on hand. While unreserved levels declined slightly from the prior year due to substantial pay-go spending, the district recorded a very solid unreserved general fund balance of almost $25 million or 26% of spending in fiscal 2007, which still met the district's operating, unobligated reserve policy amount of at least three months of expenditures. Unaudited results for fiscal 2008 point to the use of $2 million in reserves for primarily one-time, capital expenditures. The fiscal 2009 budget was reportedly adopted with conservative revenue and enrollment estimates that included a drawdown of $3 million from general fund reserves for the opening of two new schools and 3% salary increases on average. District officials indicate fiscal 2009 expenditures are primarily on target with budget projections and that BISD will most likely seek an additional, discretionary operating tax levy from voters in October 2009.
The current offering represents the first issuance of a $37.5 million authorization approved in May 2008 by a strong percentage of voters. Under conservative growth assumptions, issuance of the entire authorization is not anticipated to have an impact on the existing debt service tax rate. This portion will be used primarily for renovation and expansion of existing elementary school facilities. Roughly 25% of the district's debt service is supported by the state due to the district's low property wealth. Consequently, direct debt ratios are moderate, although overall debt levels are moderately high, primarily due to the overlapping debt of the city of Bryan. The next and final new money issuance from this authorization is anticipated at not quite $10 million in 2009. District officials anticipate this will meet facility needs until 2012, at which time the district expects to approach voters with an additional bond package request. Amortization is below average; in 10 years, approximately 40% of principal will be retired.
Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, Austin
Rebecca C. Moses, 512-215-3739
Steve Murray, 512-215-3729
Cindy Stoller, 212-908-0526
(Media Relations, New York)
cindy.stoller@fitchratings.com
