Fitch Ratings assigns an 'AA-' rating to Community High
School District Number 223 (Homewood-Flossmoor), Illinois' (the
district) $6.3 million general obligation (GO) limited tax school
bonds, series 2006, scheduled for negotiated sale March 21 through
Fifth Third Securities. Proceeds will finance capital improvements at
the high school, including an expansion of the building entrance and
cafeteria. The bonds are GOs of the district, payable from property
taxes levied on all taxable property within its borders, subject to
limitation as to amount but unlimited as to rate. The Rating Outlook
is Stable. Fitch also affirms the 'AA-' rating for the district's
$17.7 million of outstanding GO debt.
The 'AA-' rating reflects the district's recognized academic excellence and strong community support, expanding property tax base, above-average wealth levels, improving financial position, and modest direct debt levels. After encountering a period of operating shortfalls as the district undertook a substantial capital program and implemented a retirement incentive program, the economic benefits of these initiatives and a successful tax referendum continue to restore its financial position. As the district's future capital needs remain modest and expenses are predictable under the terms of five-year labor agreements, Fitch expects the district's reserves to increase steadily. The Stable Outlook is based on the district's steady tax base growth and enrollment levels, as well as its minimal future capital needs.
The district serves an affluent region of suburban Cook County, approximately 25 miles south of Chicago. The district includes the villages of Flossmoor and Homewood and portions of Glenwood, Hazel Crest, Chicago Heights and Olympia Fields. The district is largely residential in nature, as residents commute to employment centers throughout the metropolitan area. The per capita money income of the district is estimated to equal 138% of the national average.
Appreciation of home values associated with the region's expanding economy, combined with steady residential construction activity, generated a 5.1% annual increase in district property values from 1997-2004. Residential property accounts for 80% of the district's tax base, commercial uses 14%, and industrial 5.5%. The property tax base is well diversified, as the 10 largest taxpayers hold just 7.8% of the district's total assessed valuation. Sears Holdings (formerly K-Mart) and Surplus Properties are the district's largest taxpayer, each representing 1.2% of total assessed valuation.
The district's financial position reflects the use of general fund balances for an extensive renovation of the high school facility and the initiation of an early retirement program. While the retirement program encountered high up-front costs, the district expects to reap continuing benefits as 77 high salaried staff participated in the program, with replacements hired at less senior levels of salary. As a result, the district recorded operating deficits in the general fund from fiscal years 1997-2003.
With the operational savings from the retirement program beginning to accrue in fiscal 2004, as well as the district receiving an additional $7 million annually as a result of a successful operational property tax referendum that passed with 66% of the vote in 2002, the district recorded a $4 million operating surplus for fiscal 2004. Still, the district's undesignated general fund balance deficit equaled $4.2 million in fiscal 2004. The district's financial position improved further in fiscal 2005, with a $4.5 million surplus in the general fund bringing the undesignated fund balance to a positive $320,000. When combined with a $10.5 million working cash fund balance, the district's unrestricted reserves equal 23.8% of general fund spending.
The district's fiscal 2006 budget estimates a slight surplus for the year, reflecting a one-time use of resources for improvements to the school auditorium. The district estimates that the continued savings from the retirement program and cash flow from the property tax should generate approximately $10 million in revenues over expenses through fiscal 2009, allowing it to continue to improve its financial position. Furthermore, the district should benefit from the scheduled 2009 expiration of a tax increment financing district in the Village of Homewood.
The district's use of internal funds for its capital program results in a modest direct debt burden equal to $534 per capita and 1.2% of full market value. Amortization is rapid, with 100% of outstanding debt repaid within 10 years. With the exception of the current transaction, the district expects to fund its minimal future capital needs through internal sources. Overall debt levels are moderate at $2,049 per capita and 4.7% of full market value, reflecting the borrowing of underlying elementary school districts.
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.
The 'AA-' rating reflects the district's recognized academic excellence and strong community support, expanding property tax base, above-average wealth levels, improving financial position, and modest direct debt levels. After encountering a period of operating shortfalls as the district undertook a substantial capital program and implemented a retirement incentive program, the economic benefits of these initiatives and a successful tax referendum continue to restore its financial position. As the district's future capital needs remain modest and expenses are predictable under the terms of five-year labor agreements, Fitch expects the district's reserves to increase steadily. The Stable Outlook is based on the district's steady tax base growth and enrollment levels, as well as its minimal future capital needs.
The district serves an affluent region of suburban Cook County, approximately 25 miles south of Chicago. The district includes the villages of Flossmoor and Homewood and portions of Glenwood, Hazel Crest, Chicago Heights and Olympia Fields. The district is largely residential in nature, as residents commute to employment centers throughout the metropolitan area. The per capita money income of the district is estimated to equal 138% of the national average.
Appreciation of home values associated with the region's expanding economy, combined with steady residential construction activity, generated a 5.1% annual increase in district property values from 1997-2004. Residential property accounts for 80% of the district's tax base, commercial uses 14%, and industrial 5.5%. The property tax base is well diversified, as the 10 largest taxpayers hold just 7.8% of the district's total assessed valuation. Sears Holdings (formerly K-Mart) and Surplus Properties are the district's largest taxpayer, each representing 1.2% of total assessed valuation.
The district's financial position reflects the use of general fund balances for an extensive renovation of the high school facility and the initiation of an early retirement program. While the retirement program encountered high up-front costs, the district expects to reap continuing benefits as 77 high salaried staff participated in the program, with replacements hired at less senior levels of salary. As a result, the district recorded operating deficits in the general fund from fiscal years 1997-2003.
With the operational savings from the retirement program beginning to accrue in fiscal 2004, as well as the district receiving an additional $7 million annually as a result of a successful operational property tax referendum that passed with 66% of the vote in 2002, the district recorded a $4 million operating surplus for fiscal 2004. Still, the district's undesignated general fund balance deficit equaled $4.2 million in fiscal 2004. The district's financial position improved further in fiscal 2005, with a $4.5 million surplus in the general fund bringing the undesignated fund balance to a positive $320,000. When combined with a $10.5 million working cash fund balance, the district's unrestricted reserves equal 23.8% of general fund spending.
The district's fiscal 2006 budget estimates a slight surplus for the year, reflecting a one-time use of resources for improvements to the school auditorium. The district estimates that the continued savings from the retirement program and cash flow from the property tax should generate approximately $10 million in revenues over expenses through fiscal 2009, allowing it to continue to improve its financial position. Furthermore, the district should benefit from the scheduled 2009 expiration of a tax increment financing district in the Village of Homewood.
The district's use of internal funds for its capital program results in a modest direct debt burden equal to $534 per capita and 1.2% of full market value. Amortization is rapid, with 100% of outstanding debt repaid within 10 years. With the exception of the current transaction, the district expects to fund its minimal future capital needs through internal sources. Overall debt levels are moderate at $2,049 per capita and 4.7% of full market value, reflecting the borrowing of underlying elementary school districts.
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.