Fitch Ratings assigns an 'AAA' rating to Aledo
Independent School District, Texas' $23 million unlimited tax
refunding bonds, series 2005-C, scheduled to be sold on Oct. 12 via
negotiation to a syndicate led by First Southwest Co. The 'AAA' rating
is based on the guaranty by the Texas Permanent School Fund. Fitch
also assigns an 'A-' underlying rating to the series 2005-C bonds and
affirms the 'A-' rating on the district's outstanding $78.8 million
unlimited tax bonds. The Rating Outlook is Stable.
Payment for the bonds is provided by an ad valorem tax levied, without legal limitation as to rate or amount, against all taxable property within the district. Bond proceeds will be used to refund a portion of the district's outstanding debt and pay issuance costs.
Fitch's 'A-' rating reflects the district's improved financial position, strong tax base growth, and above-average wealth levels. Offsetting risks include a very high debt burden and slow principal pay-out rate, both of which are not unusual for Texas school districts with small but rapidly growing enrollment bases. Other credit concerns include substantial future growth related capital needs in five to six years, although the favorable prospects for continued strong tax base growth should help mitigate the impact on residents' debt burden.
The district is located in the southeastern portion of Parker County along with a small portion of western Tarrant County. The district's primary population center is the city of Aledo, a small agricultural center located 19 miles west of Ft. Worth. As evidenced by numerous high-end residential developments, Aledo is transitioning from an agricultural-based economy into an affluent bedroom community for the Ft. Worth-Arlington metropolitan statistical area (MSA). Primarily residential in its composition, the district's tax base has grown by a rapid compound annual average of 14% since fiscal 2000. Likewise, the district's small enrollment base is growing by an average of over 6% annually, bringing total enrollment to over 3,900 in fiscal 2006.
As a result of strong taxable assessed valuation (TAV) growth, the composition of the district's general fund revenues has undergone a substantial shift. Previously evenly split between ad valorem taxes and state aid, property taxes now comprise two-thirds of general fund revenues in fiscal 2004. After nearly depleting reserves in fiscal 2001, a new administration quickly restored the district's financial position to adequate levels. Fiscal 2004 general fund reserves totaled $2.6 million, equal to one-and-one-half months of operating expenditures. Notably, unaudited fiscal 2005 results point to a $2.7 million operating surplus, doubling its undesignated fund balance to $5.3 million or 24% of spending. If audited results maintain these preliminary results, management will have essentially attained its three-month fund balance goal two years earlier than planned. The large surplus is due to additional state aid associated with greater than budgeted enrollment growth in the current year and the past biennium. The fiscal 2006 budget is balanced, but greater than budgeted enrollment growth is projected to result in at least a $300,000 operating surplus.
The current offering is a straight refunding projected to result in net present value savings of $545,000 or 2.4% of refunded bonds. In April 2005, the district issued the first installment of a $53 million authorization approved by voters in February 2005. Bond projects include the construction of a new elementary school, various school renovations and additions, plus an 8,000-seat sports complex. For the entire authorization, the district projects a sizeable two-thirds increase in the debt service tax rate by fiscal 2008, although a lesser impact is likely, due to greater than projected TAV growth. Overall debt levels are very high given the district's recent ramp-up in debt financing for its rapidly growing enrollment base. Likewise, the principal pay-out rate is well below average at only 20% in 10 years.
The district's proximity to the Ft. Worth's growing employment base has fueled substantial residential development. Within the district's 131-square mile boundaries, a total of 21,000 residential units have been planned over a 30-year build-out period. The largest approved development is Walsh Ranch with over 10,000 single-family homes, totaling $3.4 billion in taxable value at buildout. After more than doubling in fiscal years 1999-2005, district officials project its enrollment base to grow by 50% in five years, requiring a large bond program totaling $100 million-$130 million for five new schools and renovation and expansion of existing schools.
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.
Payment for the bonds is provided by an ad valorem tax levied, without legal limitation as to rate or amount, against all taxable property within the district. Bond proceeds will be used to refund a portion of the district's outstanding debt and pay issuance costs.
Fitch's 'A-' rating reflects the district's improved financial position, strong tax base growth, and above-average wealth levels. Offsetting risks include a very high debt burden and slow principal pay-out rate, both of which are not unusual for Texas school districts with small but rapidly growing enrollment bases. Other credit concerns include substantial future growth related capital needs in five to six years, although the favorable prospects for continued strong tax base growth should help mitigate the impact on residents' debt burden.
The district is located in the southeastern portion of Parker County along with a small portion of western Tarrant County. The district's primary population center is the city of Aledo, a small agricultural center located 19 miles west of Ft. Worth. As evidenced by numerous high-end residential developments, Aledo is transitioning from an agricultural-based economy into an affluent bedroom community for the Ft. Worth-Arlington metropolitan statistical area (MSA). Primarily residential in its composition, the district's tax base has grown by a rapid compound annual average of 14% since fiscal 2000. Likewise, the district's small enrollment base is growing by an average of over 6% annually, bringing total enrollment to over 3,900 in fiscal 2006.
As a result of strong taxable assessed valuation (TAV) growth, the composition of the district's general fund revenues has undergone a substantial shift. Previously evenly split between ad valorem taxes and state aid, property taxes now comprise two-thirds of general fund revenues in fiscal 2004. After nearly depleting reserves in fiscal 2001, a new administration quickly restored the district's financial position to adequate levels. Fiscal 2004 general fund reserves totaled $2.6 million, equal to one-and-one-half months of operating expenditures. Notably, unaudited fiscal 2005 results point to a $2.7 million operating surplus, doubling its undesignated fund balance to $5.3 million or 24% of spending. If audited results maintain these preliminary results, management will have essentially attained its three-month fund balance goal two years earlier than planned. The large surplus is due to additional state aid associated with greater than budgeted enrollment growth in the current year and the past biennium. The fiscal 2006 budget is balanced, but greater than budgeted enrollment growth is projected to result in at least a $300,000 operating surplus.
The current offering is a straight refunding projected to result in net present value savings of $545,000 or 2.4% of refunded bonds. In April 2005, the district issued the first installment of a $53 million authorization approved by voters in February 2005. Bond projects include the construction of a new elementary school, various school renovations and additions, plus an 8,000-seat sports complex. For the entire authorization, the district projects a sizeable two-thirds increase in the debt service tax rate by fiscal 2008, although a lesser impact is likely, due to greater than projected TAV growth. Overall debt levels are very high given the district's recent ramp-up in debt financing for its rapidly growing enrollment base. Likewise, the principal pay-out rate is well below average at only 20% in 10 years.
The district's proximity to the Ft. Worth's growing employment base has fueled substantial residential development. Within the district's 131-square mile boundaries, a total of 21,000 residential units have been planned over a 30-year build-out period. The largest approved development is Walsh Ranch with over 10,000 single-family homes, totaling $3.4 billion in taxable value at buildout. After more than doubling in fiscal years 1999-2005, district officials project its enrollment base to grow by 50% in five years, requiring a large bond program totaling $100 million-$130 million for five new schools and renovation and expansion of existing schools.
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.
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