In the course of routine surveillance, Fitch has affirmed the 'A+' rating on Oroville City Elementary School District's (the district) approximately $5.1 million in outstanding general obligation bonds. The Rating Outlook is Stable.
The A+ rating reflects the district's good financial operations evidenced by sound reserves, low debt levels with manageable capital needs and stable assessed valuation growth. However, credit concerns include recent enrollment declines, the district's reliance on state funding for operations, and the local economy's low income levels and above-average unemployment rates.
Enrollment declines averaged 3.4% annually between fall 2002 and fall 2007. Importantly, Fitch notes that the district has been able to manage expenditures and maintain sound general fund reserve levels, despite the loss of state aid due to declining enrollment. Fiscal 2007 audited results indicated an unreserved general fund balance of $3.4 million, or 13% of total spending. The financial impact of reduced enrollment has been somewhat mitigated by the district's expenditure cuts in the last two years and a strong cash management program implemented to manage future spending. The district projects enrollment to stabilize within the next several years due to an expected slowdown in population out-migration, and new programs, subject to receipt of grant funds, intended to limit student transfers into charter schools. The Stable Outlook reflects the projected enrollment stabilization, and Fitch's expectation that the district will continue to successfully manage expenditures and maintain sound general fund reserve levels.
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.
