Fitch Affirms Cameron ISD, TX 'A+' Underlying; Outlook Stable
Fitch Ratings has affirmed the rating for the following Cameron Independent School District, Texas (the district) bonds:
-- $18.5 million unlimited tax refunding bonds outstanding, series 2010 and 2006.
The Rating Outlook is Stable.
The bonds are secured by an unlimited ad valorem tax levied against all taxable property in the district, and are secured further by the Texas PSF guarantee.
KEY RATING DRIVERS
STABLE FINANCIAL PERFORMANCE: The district's financial profile is sound, characterized by healthy operating reserves and conservative budgeting and financial management practices. The district has managed this performance despite recent state funding cutbacks as evidenced by management's ability to cut spending over the last two fiscal years.
TAX BASE CONCENTRATION: The district's tax base is concentrated in oil and gas properties, with the top ten taxpayers comprising 23% of taxable assessed value (TAV). However, the capital intensive nature of the properties on the tax rolls and output demand from the energy sector help mitigate these concerns.
MINIMAL GROWTH PRESSURES: The district is largely agricultural and maintains fairly stable student enrollment with minimal growth pressures and ample capacity in existing facilities. Capital needs are minimal, as district facilities are relatively new; ongoing repair and replacement to plant components will be done using available resources.
MODEST DEBT BURDEN: Debt levels are affordable (after adjusting for state support), and the pace of debt repayment is slightly below average.
Cameron ISD is located in Milam County in central Texas. The district serves primarily the city of Cameron, which is the county seat. District enrollment has been fairly flat at about 1,500 students in recent years, and facilities include two elementary schools, and one junior and one senior high school.
The county remains predominantly agricultural but has seen various industrial activities emerge in recent decades. The largest of these enterprises are Charlotte Pipe and Foundry and BNSF Railway. The 2009 closing of a nearby aluminum smelting plant has held county unemployment levels stubbornly high at 9%. While the rate has dropped from 10.3% during the same period last year, this is largely attributable to a decreased labor force.
Gains in the tax base have been very modest historically, averaging less than 1% annually over the past decade. Values declined in fiscal 2011, with fiscal 2012 TAV registering a 1% increase to $252 million. Tax base and sector concentration has declined slightly but remains high, with the top ten taxpayers at about 23% of TAV in fiscal 2012.
Area population trends have been stable over the last decade, showing a very modest decline of less than 1%. District income levels are higher than the county average, but well below state and national averages. Median household income in 2010 was roughly 75% of the state and national averages. The poverty rate is also high, with approximately 18% of county residents below the poverty line.
STABLE FINANCIAL POSITION A MITIGATING FACTOR
The district's financial condition is sound, with solid operating reserve levels. The general fund added to fund balance four of the past six fiscal years, including a $200,000 gain in fiscal 2011. The unreserved general fund balance at fiscal 2011 year-end totaled $4.3 million or nearly 37% of spending and transfers out.
The district continues to maintain a sound financial profile despite operating pressures associated with state funding cuts. A trend of annual operating surpluses has contributed to growing reserve levels, reaching an unrestricted fund balance (committed, assigned and unassigned per GASB 54) of $4.3 million or 37% of spending in fiscal 2011. Liquidity is also favorable, with fiscal 2011 cash and investments representing more than 42% of operating expenditures.
State funding cuts totaled approximately $600,000 (5% of general fund revenue in fiscal 2012) and the district balanced the fiscal 2012 budget with cost savings from staffing reductions in both support services and professional positions. Current projections for year-end operating results indicate a modest $260,000 surplus which appears reasonable given management's track record of budgeting conservatively. The adopted 2013 budget is balanced, closing another expected gap associated with state and federal funding cuts totaling $600,000.
AFFORDABLE TAX AND DEBT BURDEN
The O&M rate currently is at the statutory cap of $1.04 per $100 of TAV, which can be increased by an additional $0.13 only with voter approval. District officials report no plans to approach voters for a tax rate increase. The total tax rate for fiscal 2012 is $1.34, which compares favorably with many other central Texas districts.
District debt levels are affordable, with overall debt at $1,500 per capita and 2.3% of fiscal 2012 market value. These ratios are net of state debt service support that totals 45% of annual debt payments. The pace of debt retirement is slightly below average at 42% repaid in 10 years. Management reports that district facilities are in good condition, and as a result there are no large capital needs anticipated in the near term. They note that available funds will be used for any repair and upkeep capital projects at district campuses.
District employees participate in the Teachers Retirement System of Texas (TRS), a cost-sharing multiple employer pension system. Contributions are made by plan members and the state on behalf of the district, eliminating any liability for the district. The district's debt service and pension contributions represent an affordable 15% of fiscal 2011 general government expenditures.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors, the Underwriter.
Applicable Criteria and Related Research:
-- 'Tax-Supported Rating Criteria' (Aug. 14, 2012);
-- 'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Matt Dustin, +1-512-215-3727
111 Congress Ave, Suite 2010
Austin, TX 78801
Rebecca Meyer, +1-512-215-3733
Jessalynn Moro, +1-212-908-0608
Elizabeth Fogerty, +1-212-908-0526 (New York)