In the course of routine surveillance, Fitch Ratings affirms its 'AA' rating on Moreland School District, California's (the district) $84 million in outstanding unlimited tax (ULT) general obligation bonds (GOs). The Rating Outlook remains Stable.
The rating reflects the district's strong reserve levels, its diverse revenue sources and a relatively prosperous tax base, which creates a high level of independence from state funding. The rating further reflects a significant rise in the overall indebtedness of the district since Fitch's last rating review, difficulties in achieving operating balance in the general fund, and an uncertain outlook for the district's housing market. The key rating driver is the district's ability to manage its financial operations address the structural imbalance and maintain strong reserve levels.
The district's financial position has improved notably since Fitch's last review with unreserved general fund balances up from 3.1% of spending and transfers out in fiscal 2004 to 12% in fiscal 2008. This higher degree of financial flexibility is a key credit factor as the district faces an upward trend in expenditures that would have led to a second year of operating deficits in fiscal 2009 without the benefit of one-time revenues. The fiscal 2010 budget projects a slight weakening of unreserved balances to 11%, on a budgetary basis, and the district is relying on spending cuts in fiscal 2011, as well as revenue from a new parcel tax, to stave growth in the structural imbalance.
The district is located in Santa Clara County, California, predominantly within the city of San Jose but also incorporating sections of Campbell and Saratoga. The wider tax base is prosperous, with median household income in the San Jose metropolitan area over 40% higher than the state average, and over 30% higher in the city of San Jose itself. The district's total assessed value has yet to experience a decline, despite the regional housing crisis, and grew a modest 1.3% in the 2010 valuation.
The district's overall net debt rose sharply since the district's last rating review, from 3.4% of market value to 6.5%, and from $2,932 to $7,909 per capita. The district direct indebtedness remains stable, at approximately 1.5% of market value and $1,847 per capita.
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.
Contacts:
Fitch Ratings
Tom Cowell, 212-908-9130, New York
Karen Ribble,
415-732-5611, San Francisco
or
Media Relations:
Cindy
Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com
