In the course of routine surveillance, Fitch Ratings affirms the 'A+' rating on the Rocklin Unified School District (County of Placer, California) Community Facilities District No.1 (CFD No.1) and Community Facilities District No.2 (CFD No.2), $102.9 million outstanding special tax revenue bonds. The Rating Outlook is Stable.
The 'A+' rating reflects the taxpayer diversity, relatively low taxpayer delinquency rate, strong foreclosures covenants, and adequate debt service coverage by the maximum tax and high value-to-lien ratio, balanced by the limited nature of the tax and the very weak regional residential housing market. Given the limited nature of the tax, low delinquency rates is important to maintaining the current rating level.
Bonds are secured by the combined annual parcel taxes levied on property within the CFD No. 1, CFD No. 2 and CFD No. 3 which amount per parcel is based on the development phase of an individual residential property. The combined CFD areas encompass almost 12,000 individually owned residential units, resulting in strong taxpayer diversity. Tax collections are currently strong at 96.5%, up from 96.1% in fiscal 2007. Furthermore, in the event that delinquencies exceed $10,000 for individual properties or if the overall delinquency rate rises above 5%, the CFDs have covenanted to pursue accelerated foreclosure process. Assessed valuation is not tied to repayment of the bonds, but has declined about 5% since fiscal 2008, as a result of limited new development to offset reductions in home price valuations.
The special taxes are levied in each of the CFDs in amounts sufficient to make annual debt service payments, fund anticipated delinquencies, replenish the required bond reserves, and cover all pay-as-you-go expenses. The CFDs are currently levying at the maximum amount per parcel, and based on the number of existing residential parcels and assuming no further development, this generates revenues to cover debt service 1.15 times (x). In addition, if the base tax rates are projected to be insufficient, backup taxes can be imposed on undeveloped parcels, which could generate an additional 0.05x debt service, resulting in total cushion of about 20%.
The Rocklin Unified School District is located 14 miles northeast of Sacramento in Placer County. Rocklin appears to be more economically stable than the Sacramento metropolitan statistical area (MSA), with lower unemployment (8.2% in June 2009 compared to 11.6% in the MSA) higher per capita income (116% of the MSA) and lower foreclosure rates on non-agency loans (10% for Rocklin compared to 14% for the MSA).
Debt levels, including the full accreted value of the capital appreciation bonds, remain moderate, estimated at $3,814 per capita and 5.5% of market value including estimated overlapping debt. Amortization is average with 55.3% repaid in 10 years.
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