AUSTIN, Texas - (Business Wire) Fitch Ratings has assigned an 'AA' rating to the $18.5 million unlimited tax refunding bonds, series 2009 of Eanes Independent School District, Texas (the district). Additionally, Fitch has affirmed its 'AA' underlying rating on the district's $105.8 million in outstanding general obligation (GO) bonds (post refunding). The Rating Outlook is Stable. The bonds are direct obligations of the district, payable from the proceeds of an unlimited ad valorem tax levied against all taxable property within the district. Bond proceeds will be used to refund a portion of the district's outstanding unlimited tax debt for annual interest savings and to pay issuance costs.
The 'AA' rating reflects the district's sound financial profile characterized by healthy reserve levels, above average wealth levels, and conservative fiscal management. The rating also incorporates a relatively high per capita debt burden and financial pressures associated with large annual wealth equalization payments. Fitch notes that the district consistently reports positive operating results and sizeable reserves, despite equalization payments that recently have approached 50% of total general fund expenditures.
Located west of Austin in Travis County, the 31-square-mile district encompasses the cities of West Lake Hills and Rollingwood and a small portion of Austin. As a result of its affluent tax base, the district has been categorized as a 'property rich' district and consequently has made substantial wealth equalization payments to the state since fiscal 1997. Recent payments have totaled $50.4 million in fiscal 2008 and $58 million in fiscal 2009; these payments represented 46% and 49% of total general fund outlays, respectively. The district has budgeted an equalization/recapture payment of $54.2 million for fiscal 2010, and anticipates that annual payments will exceed 50% of total general fund outlays over the near-term.
Moreover, the district's operations tax rate is at the current statutory cap of $1.04 per $100 taxable assessed valuation (TAV), further limiting financial flexibility. District officials are considering seeking voter approval for additional operations tax levy authority, the first $0.02 of which would not be subject to recapture.
Despite the recent pressures, the district's financial position remains sound. At fiscal 2008 year-end the general fund balance totaled $34.9 million, or a healthy 32% of expenditures and transfers out; operating results included net income of $1.6 million for the year. The fiscal 2008 totals represented the fourth consecutive year of positive results and addition to reserves. For fiscal 2009, district officials are anticipating a modest $1.4 million drawdown in operating reserves. The district's conservative management approach is evidenced by recent expenditure growth. From fiscal 2004 to fiscal 2008, general fund expenditures increased by an average of around 6% annually as the district navigated a period of modest enrollment growth, salary and benefit pressures, and ongoing equalization transfers.
The fiscal 2010 budget includes a $4.6 million general fund balance drawdown, although the district budgets conservatively and actual results typically exceed budget projections. The fiscal 2010 budget also features a modest increase of less than 4% in general fund spending over the prior year budget, and an operations tax rate unchanged at $1.04 per $100 of TAV. Enrollment, which increased by roughly 250 students from fiscal 2005 to fiscal 2009, totals 7,485 for the current year (an increase of 132 students).
The district's per capita debt is higher than that of most comparably rated Texas school districts, although it has declined over the past several years as TAV has increased. Direct debt presently is about $4,200 per capita and overall debt is $7,350 per capita. Conversely, debt as a percentage of taxable value is lower than most other 'AA' category districts' and reflects the high wealth levels in Eanes ISD. Direct debt as percentage of fiscal 2010 TAV is 1.3%, while overall debt is 2.2%.
District officials report that an advisory committee presently is considering future capital needs, which in addition to repairs and renovations to existing campuses may also include new school buildings. The district currently has no GO bond authorization, and is considering a possible November 2010 bond election. Officials state they would like to keep any debt service tax rate impact from a new bond program to around $0.05; the fiscal 2010 debt service tax rate is $0.1625 per $100 of TAV.
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Fitch Ratings, Austin
Steve Murray, 512-215-3729
Rebecca Moses, 512-215-3739
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