Fitch assigns an initial 'AA-' rating to the Paradise
Valley Unified School District No. 69 of Maricopa County, Arizona's
(the district) $41.1 million school improvement bonds, project of
2005, series A (2006). Fitch also assigns an 'AA-' rating to the
district's $302.9 million in outstanding general obligation (GO)
bonds. The bonds are tentatively scheduled to sell the week of March
27 via a negotiated offering through a group led by Peacock, Hislop,
Staley & Given. The bonds are direct and general obligations of the
district and are payable from an unlimited ad valorem tax levied on
all taxable property within the district. Proceeds will be used to
construct various district facilities and to pay issuance costs. The
Rating Outlook is Stable.
The 'AA-' rating reflects the district's sound financial profile aided by strong community support for both operational and capital needs, moderate debt burden, and above-average wealth levels. Also factored into the rating is the rapid pace of development underway in portions of the district and the potential operational and capital pressures that could result. The current and projected residential construction is expected to spur steady enrollment gains over the near term; this growth will reverse the recent trend of stable to slightly declining enrollment that has been underway since fiscal 2002.
Located in the northeast portion of the Phoenix metropolitan statistical area (MSA) and including a portion of the city of Scottsdale (GO bonds rated 'AAA' by Fitch), the district is the fifth largest in the state, with a current average daily membership of 33,150. The district operates 30 elementary schools, eight middle schools, and six high schools. District schools are recognized for their academic achievements, with 40% of schools rated Excelling and 27% rated High Performing by the state; both of these levels are well above state averages.
District officials expect enrollment growth to accelerate over the next 5-10 years due to homebuilding activity currently underway in the northern portion of the district. The development activity is occurring on land previously owned by the state that has been auctioned off to various development interests. Projects currently underway contain more than 3,000 residential lots, with home prices beginning at $600,000. District officials also anticipate a spike in commercial development activity in this area, highlighted by a regional shopping mall that is expected to break ground in the next two to three years.
Although the district reported a small operating loss in fiscal 2005, general fund reserves remained healthy (as compared to most Arizona school districts) at more than $10.6 million or more than 6% of spending levels. The district has made a concerted effort over the past several fiscal years to increase liquidity in order to better manage cash flow demands. General fund cash and investments at June 30, 2005 were a healthy $22.5 million.
Projections for fiscal 2006 anticipate a manageable decline in the general fund balance of $1 million-$2 million. While the projected enrollment growth will generate additional operational and facility needs, Fitch believes that the corresponding tax base growth likely will produce sufficient increases in property tax revenues to mitigate any financial pressures that could arise. Funding for district operations is enhanced by two overrides approved by voters in 2004: a 10% maintenance and operation budget limit override and a 3% K-3 budget limit override.
The district's debt burden is moderate, a result of the above-average wealth levels in the district and its relatively mature status and debt retirement practices. Direct debt per capita, and as a percentage of current market value currently are $1,723 and 1.7%, respectively. Overall ratios are only moderately higher at $2,863 per capita and 2.8% of full cash value. Fitch notes the rapid pace of principal repayment as a positive credit factor, with more than 80% of outstanding and proposed debt retired in 10 years. Given the pace of debt retirement and projected tax base growth, Fitch concurs with district officials that any impact on the secondary assessed valuation (SAV) tax rate from the current or future debt offerings will be minimal.
The series A (2006) bonds are the first installment from a $161.7 million Class B authorization approved by two-thirds of voters at a November 2005 election. Due to the lack of enrollment growth recently and current facility space, the district no longer qualifies for state School Facilities Board (SFB) funding of new schools. The current authorization is expected to finance facility needs for the next five years, and district officials anticipate annual borrowings through 2010. The district anticipates it will present additional Class B bond proposals to voters as enrollment and school construction needs dictate. The district also addresses its capital needs through a $9.1 million annual capital outlay budget override that was approved by voters in November 2005.
Maricopa County is home to the Phoenix MSA and is the state's major population and economic center. The MSA's December 2005 unemployment rate was 2.7%, compared to the state's 4.2% and the 4.9% national average. County wealth levels, as measured by per capita income and median household buying income, comfortably exceed state and national averages. The district's wealth level, as measured by full cash value per capita, is well above average at $101,577.
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 sound financial profile aided by strong community support for both operational and capital needs, moderate debt burden, and above-average wealth levels. Also factored into the rating is the rapid pace of development underway in portions of the district and the potential operational and capital pressures that could result. The current and projected residential construction is expected to spur steady enrollment gains over the near term; this growth will reverse the recent trend of stable to slightly declining enrollment that has been underway since fiscal 2002.
Located in the northeast portion of the Phoenix metropolitan statistical area (MSA) and including a portion of the city of Scottsdale (GO bonds rated 'AAA' by Fitch), the district is the fifth largest in the state, with a current average daily membership of 33,150. The district operates 30 elementary schools, eight middle schools, and six high schools. District schools are recognized for their academic achievements, with 40% of schools rated Excelling and 27% rated High Performing by the state; both of these levels are well above state averages.
District officials expect enrollment growth to accelerate over the next 5-10 years due to homebuilding activity currently underway in the northern portion of the district. The development activity is occurring on land previously owned by the state that has been auctioned off to various development interests. Projects currently underway contain more than 3,000 residential lots, with home prices beginning at $600,000. District officials also anticipate a spike in commercial development activity in this area, highlighted by a regional shopping mall that is expected to break ground in the next two to three years.
Although the district reported a small operating loss in fiscal 2005, general fund reserves remained healthy (as compared to most Arizona school districts) at more than $10.6 million or more than 6% of spending levels. The district has made a concerted effort over the past several fiscal years to increase liquidity in order to better manage cash flow demands. General fund cash and investments at June 30, 2005 were a healthy $22.5 million.
Projections for fiscal 2006 anticipate a manageable decline in the general fund balance of $1 million-$2 million. While the projected enrollment growth will generate additional operational and facility needs, Fitch believes that the corresponding tax base growth likely will produce sufficient increases in property tax revenues to mitigate any financial pressures that could arise. Funding for district operations is enhanced by two overrides approved by voters in 2004: a 10% maintenance and operation budget limit override and a 3% K-3 budget limit override.
The district's debt burden is moderate, a result of the above-average wealth levels in the district and its relatively mature status and debt retirement practices. Direct debt per capita, and as a percentage of current market value currently are $1,723 and 1.7%, respectively. Overall ratios are only moderately higher at $2,863 per capita and 2.8% of full cash value. Fitch notes the rapid pace of principal repayment as a positive credit factor, with more than 80% of outstanding and proposed debt retired in 10 years. Given the pace of debt retirement and projected tax base growth, Fitch concurs with district officials that any impact on the secondary assessed valuation (SAV) tax rate from the current or future debt offerings will be minimal.
The series A (2006) bonds are the first installment from a $161.7 million Class B authorization approved by two-thirds of voters at a November 2005 election. Due to the lack of enrollment growth recently and current facility space, the district no longer qualifies for state School Facilities Board (SFB) funding of new schools. The current authorization is expected to finance facility needs for the next five years, and district officials anticipate annual borrowings through 2010. The district anticipates it will present additional Class B bond proposals to voters as enrollment and school construction needs dictate. The district also addresses its capital needs through a $9.1 million annual capital outlay budget override that was approved by voters in November 2005.
Maricopa County is home to the Phoenix MSA and is the state's major population and economic center. The MSA's December 2005 unemployment rate was 2.7%, compared to the state's 4.2% and the 4.9% national average. County wealth levels, as measured by per capita income and median household buying income, comfortably exceed state and national averages. The district's wealth level, as measured by full cash value per capita, is well above average at $101,577.
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.