Fitch Affirms Placer Union High School District, CA's GOs at 'AA' & COPs at 'AA-'; Outlook Stable
Fitch Ratings has affirmed the following ratings for Placer Union High School District (the district):
--$17.1 million general obligation (GO) bonds, 1999 series B & C, at 'AA';
--$1.4 million certificates of participation (COPs) series 2003 at 'AA-'.
The Rating Outlook is Stable.
The GO bonds are secured by an unlimited ad valorem tax. The COPs are secured by lease payments subject to annual appropriation by the district.
HEALTHY FINANCIAL PROFILE: The district maintains consistently positive operating margins, strong reserve levels, and ample liquidity.
REDUCED RISKS FROM STATE DISTRESS: The November 2012 approval of Proposition 30 by California voters removed the threat of mid-year funding cuts for the district. The governor's proposed fiscal 2014 state budget presents a more favorable fiscal future for K-12 school districts.
LIMITED ECONOMY: The district's primarily residential economy is limited, but district residents benefit from their proximity to economic opportunities in Placer County and Sacramento. Socioeconomic indicators are average.
MANAGEABLE LONG TERM OBLIGATIONS: Debt levels are low. Pension and other post-employment benefit costs (OPEB) are not expected to pressure the credit due to affordable carrying costs.
APPROPRIATION RISK: The 'AA-' rating on the COPs reflects the district's general creditworthiness, the inherent appropriation risk, and the essentiality of the assets under the lien.
Located about forty miles north of Sacramento, the district encompasses approximately 990 square miles and includes the cities of Auburn, Foresthill, Loomis, Meadow Vista, Colfax, and many unincorporated areas of Placer County. The district serves over 4,000 students.
HEALTHY FINANCIAL PROFILE
The district has maintained operating surpluses in each of the last few years despite the recessionary environment. The district derives a relatively high 54% of its revenues from property taxes, which minimized the district's exposure to state deferral risk. The district ended fiscal 2012 with a $1.8 million net operating surplus, which represents 4.8% of total general fund spending.
The district maintains strong reserve levels. In fiscal 2011, GASB 54 consolidated existing discretionary special funds with the general fund. Fiscal 2012 unrestricted fund balance (sum of the unassigned, assigned and committed funds) is a robust 45% of total general fund spending.
With the passage of state Proposition 30, which temporarily increases state income and sales taxes, districts were spared mid-year funding cuts in fiscal 2013. The district avoids a $1.8 million cut from the state, as a result. The first interim report assumes the passage of Proposition 30 but still projects a $2.2 million deficit (6% of total general fund spending) due to conservative budgeting and projected decreases in enrollment. Fitch expects close to break-even operations based on expected savings and enrollment figures.
LIMITED ECONOMY WITH AVERAGE SOCIOECONOMICS
The district's local economy is limited since it is mostly residential or undeveloped. However, this is somewhat mitigated by the district's location within Placer County, which has been one of the fastest growing counties in the state in the last decade. Top county employers include Kaiser-Permanente and Hewlett-Packard. The district also benefits from its commutable proximity to Sacramento.
The district's socioeconomics are average. Median household income in 2011 equals 108% and 126% of state and national averages, respectively. Placer County's unemployment rate of 8.9% in October 2012 is lower than the state unemployment rate of 9.8% but higher than the national unemployment rate of 7.5%. Educational attainment levels are on par with national averages. District population growth trails the national average, despite being within the faster growing Placer County. Assessed value (AV) has been falling over the last several years but Fitch expects AV to stabilize in fiscal 2013, due to a turnaround in home sales.
MANAGEABLE DEBT AND LONG-TERM LIABILITIES
Overall debt levels are low at $1,107 per capita and 0.9% of assessed value. Amortization is a moderate 53% of principal retired in 10 years.
The district participates in two state pension plans, the California Public Employees' Retirement System and the California State Teachers' Retirement System (CalSTRS). While the district contributes 100% of the required contribution for each system, CalSTRS is funded on a statutory basis which in recent years has been substantially less than the actuarially required contribution. The district's required contributions was equal to a manageable 5.5% of total general fund spending; however, given the poor funded ratios for both plans, Fitch expects increasing costs for participants in the future.
OPEB costs are very manageable and represent 0.4% of total general fund spending. Total carrying costs for debt service, pension, and OPEB costs equal a low 13.7% of governmental spending (net of capital projects funds).
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, and National Association of Realtors.
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
Gary Huang, +1-212-908-0315
Fitch Ratings, Inc.
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Karen Ribble, +1-415-732-5611
Arlene Bohner, +1-212-908-0554
Elizabeth Fogerty, New York, +1-212-908-0526