Fitch Ratings assigns an 'A+' rating to the following
bonds issued by the Los Angeles Unified School District, California:
-- $500,000,000 general obligation bonds election of 2004, series F (2006);
-- $132,325,000 general obligation refunding bonds, series A;
-- $400,000,000 general obligation bonds election of 2005, series A (2006), B (2006), C (2006), and D (2006).
The series F and refunding series A bonds will be sold through negotiation on or about Jan. 31 by a syndicate led by Merrill, Lynch & Co., although the refunding bonds' sale depends on market conditions. The series A, B, C, and D bonds will be sold through negotiation on or about Feb. 7 by a syndicate led by Banc of America Securities LLC. The Rating Outlook is Stable. Tamalpais Advisors, Inc. and Kelling Northcross and Nobriga serve as co-financial advisors.
Also, Fitch affirms the 'A+' rating on $4.66 billion in outstanding parity bonds, and the 'A-' rating on various outstanding certificates of participation. The Rating Outlook for these obligations also is Stable.
The ratings reflect the district's progress toward restoring long-term financial balance as well as its ongoing budgetary pressures. Audited results for fiscal 2005 show a small operating surplus and preserve a satisfactory 5% year-end reserve. However, reserve levels have been substantially reduced in prior years. Fitch expects continued financial pressures, resulting from declining enrollment, strong labor groups, and sizable facility needs. Debt levels remain affordable but will rise as the district continues on its massive, voter-supported construction program. Fitch notes the district's adoption of sound debt and financial policies as helpful in retaining and improving credit quality.
Fiscal 2006 marks the district's third consecutive year of enrollment declines, and losses are projected through at least fiscal 2008. The declines result from slower population growth in the area, and competition, especially from charter schools, where enrollment has risen substantially. While near-term financial pressures from the decline are eased by a 'hold harmless' provision in the state funding formula, student loss results in funding declines that aren't matched dollar-for-dollar by savings.
The fiscal 2006 budget will remain balanced when anticipated labor agreements are finalized. The additional funds come from unallocated resources and state revenue that was not expected at the time the budget was enacted. Spending reductions needed to balance operations were moderate relative to total spending, although about one-third of the savings come from one-time measures.
The district continues to benefit from a broad and diverse economic base, with healthy assessed value gains and moderate job growth. The district operates the nation's second largest school system and serves a broad range of educational and community needs including adult education, jobs skills training, and day care/preschool education.
Improvement in the district's test score continues to outpace state averages. However, the scores are below state averages and last year the district was designated a Program Improvement District for its failure to show progress under the federal No Child Left Behind standards for two consecutive years. Fitch remains concerned about the impact these items could have on enrollment, state and federal funding, and financial operations.
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.
-- $500,000,000 general obligation bonds election of 2004, series F (2006);
-- $132,325,000 general obligation refunding bonds, series A;
-- $400,000,000 general obligation bonds election of 2005, series A (2006), B (2006), C (2006), and D (2006).
The series F and refunding series A bonds will be sold through negotiation on or about Jan. 31 by a syndicate led by Merrill, Lynch & Co., although the refunding bonds' sale depends on market conditions. The series A, B, C, and D bonds will be sold through negotiation on or about Feb. 7 by a syndicate led by Banc of America Securities LLC. The Rating Outlook is Stable. Tamalpais Advisors, Inc. and Kelling Northcross and Nobriga serve as co-financial advisors.
Also, Fitch affirms the 'A+' rating on $4.66 billion in outstanding parity bonds, and the 'A-' rating on various outstanding certificates of participation. The Rating Outlook for these obligations also is Stable.
The ratings reflect the district's progress toward restoring long-term financial balance as well as its ongoing budgetary pressures. Audited results for fiscal 2005 show a small operating surplus and preserve a satisfactory 5% year-end reserve. However, reserve levels have been substantially reduced in prior years. Fitch expects continued financial pressures, resulting from declining enrollment, strong labor groups, and sizable facility needs. Debt levels remain affordable but will rise as the district continues on its massive, voter-supported construction program. Fitch notes the district's adoption of sound debt and financial policies as helpful in retaining and improving credit quality.
Fiscal 2006 marks the district's third consecutive year of enrollment declines, and losses are projected through at least fiscal 2008. The declines result from slower population growth in the area, and competition, especially from charter schools, where enrollment has risen substantially. While near-term financial pressures from the decline are eased by a 'hold harmless' provision in the state funding formula, student loss results in funding declines that aren't matched dollar-for-dollar by savings.
The fiscal 2006 budget will remain balanced when anticipated labor agreements are finalized. The additional funds come from unallocated resources and state revenue that was not expected at the time the budget was enacted. Spending reductions needed to balance operations were moderate relative to total spending, although about one-third of the savings come from one-time measures.
The district continues to benefit from a broad and diverse economic base, with healthy assessed value gains and moderate job growth. The district operates the nation's second largest school system and serves a broad range of educational and community needs including adult education, jobs skills training, and day care/preschool education.
Improvement in the district's test score continues to outpace state averages. However, the scores are below state averages and last year the district was designated a Program Improvement District for its failure to show progress under the federal No Child Left Behind standards for two consecutive years. Fitch remains concerned about the impact these items could have on enrollment, state and federal funding, and financial operations.
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.