Fitch Ratings assigns an 'A+' rating to the Dysart
Unified School District No. 89 of Maricopa County, AZ's (the district)
$14.77 million school improvement bonds, project of 2002, series D
(2006) (the bonds). Fitch also affirms the underlying 'A+' rating of
the district's approximately $61 million outstanding general
obligation (GO) bonds. The Rating Outlook is Stable.
The bonds are scheduled to sell this week via negotiation to Peacock, Hislop, Staley & Given, Inc. They are general obligations of the district payable from a continuing, direct, annual unlimited ad valorem tax levied against all taxable property located within the district. Bond proceeds will be used to finance school improvements and renovations and to pay issuance costs.
The 'A+' rating and Stable Rating Outlook reflect the district's continued growth in population, secondary assessed valuation (SAV), and enrollment. The rating also reflects the district's low but increasing debt burden, and below-average principal amortization. Serving the growing cities of Surprise and El Mirage and the Town of Youngstown, the district continues to record very high gains in assessed valuation. Expected growth appears likely to continue at a rapid although slightly reduced rate given the development activity in the area and the large supply of raw land in the district. The district's financial profile has stabilized following a couple of years of negative general fund balances. Fiscal 2005 results included a return to positive operating reserves, due primarily to unspent encumbered expenditures. Year-end liquidity remains marginal due to the timing of state aid transfers, but the district reports no cash flow difficulties.
Located northwest of Phoenix in central Maricopa County, the district is one of the fastest growing school districts in Arizona. Average daily membership has tripled over the past five fiscal years. In fiscal 2006, enrollment increased nearly 25% bringing enrollment to a total of 16,768. District officials project annual enrollment will continue to grow at a rate of 20%-24% through fiscal 2015.
Growth in the district is fueled by explosive residential and commercial development primarily in the city of Surprise (GO bonds rated 'A+' by Fitch), which is located almost entirely within district boundaries. Unemployment in the area is above state and national averages, primarily due to a significant retirement presence. As part of the Phoenix metropolitan area, which is the center of state economic activity, major employment sectors in the area include agriculture, construction, and services, containing two-thirds of Arizona's labor force.
This issue represents the final installment of $70 million in class B bonds approved by a 64% margin in November 2002. The district's tax base experienced growth averaging 26% annually over the past five fiscal years, and is projected to increase another 22% for the next fiscal year. Given the district's strong tax base and population growth, the debt burden will remain low even after issuance of this debt. It is estimated that the SAV tax rate for debt service will increase by $0.08 in fiscal 2007 to service the additional debt. Moreover, with the rapid enrollment growth and accompanying capital needs, the district anticipates going back to the voters for approval of additional class B bonds in an amount to be determined. While rapid SAV growth is a credit strength, it is mitigated somewhat by slow principal repayment.
Due to the explosive growth, the district's previously solid reserves started declining in fiscal 2003, with two consecutive years of operating deficits culminating in the depletion of its unreserved, undesignated general fund balance. In fiscal 2005, the district restored a positive fund balance of $1.2 million but expects to draw down the majority of these reserves by the end of fiscal 2006. Arizona school districts budget on an essentially break-even basis and typically retain small operating reserves. For fiscal 2006, operating expenditures are expected to increase 15% from the prior year's actual level and state aid will remain the dominant revenue source.
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 bonds are scheduled to sell this week via negotiation to Peacock, Hislop, Staley & Given, Inc. They are general obligations of the district payable from a continuing, direct, annual unlimited ad valorem tax levied against all taxable property located within the district. Bond proceeds will be used to finance school improvements and renovations and to pay issuance costs.
The 'A+' rating and Stable Rating Outlook reflect the district's continued growth in population, secondary assessed valuation (SAV), and enrollment. The rating also reflects the district's low but increasing debt burden, and below-average principal amortization. Serving the growing cities of Surprise and El Mirage and the Town of Youngstown, the district continues to record very high gains in assessed valuation. Expected growth appears likely to continue at a rapid although slightly reduced rate given the development activity in the area and the large supply of raw land in the district. The district's financial profile has stabilized following a couple of years of negative general fund balances. Fiscal 2005 results included a return to positive operating reserves, due primarily to unspent encumbered expenditures. Year-end liquidity remains marginal due to the timing of state aid transfers, but the district reports no cash flow difficulties.
Located northwest of Phoenix in central Maricopa County, the district is one of the fastest growing school districts in Arizona. Average daily membership has tripled over the past five fiscal years. In fiscal 2006, enrollment increased nearly 25% bringing enrollment to a total of 16,768. District officials project annual enrollment will continue to grow at a rate of 20%-24% through fiscal 2015.
Growth in the district is fueled by explosive residential and commercial development primarily in the city of Surprise (GO bonds rated 'A+' by Fitch), which is located almost entirely within district boundaries. Unemployment in the area is above state and national averages, primarily due to a significant retirement presence. As part of the Phoenix metropolitan area, which is the center of state economic activity, major employment sectors in the area include agriculture, construction, and services, containing two-thirds of Arizona's labor force.
This issue represents the final installment of $70 million in class B bonds approved by a 64% margin in November 2002. The district's tax base experienced growth averaging 26% annually over the past five fiscal years, and is projected to increase another 22% for the next fiscal year. Given the district's strong tax base and population growth, the debt burden will remain low even after issuance of this debt. It is estimated that the SAV tax rate for debt service will increase by $0.08 in fiscal 2007 to service the additional debt. Moreover, with the rapid enrollment growth and accompanying capital needs, the district anticipates going back to the voters for approval of additional class B bonds in an amount to be determined. While rapid SAV growth is a credit strength, it is mitigated somewhat by slow principal repayment.
Due to the explosive growth, the district's previously solid reserves started declining in fiscal 2003, with two consecutive years of operating deficits culminating in the depletion of its unreserved, undesignated general fund balance. In fiscal 2005, the district restored a positive fund balance of $1.2 million but expects to draw down the majority of these reserves by the end of fiscal 2006. Arizona school districts budget on an essentially break-even basis and typically retain small operating reserves. For fiscal 2006, operating expenditures are expected to increase 15% from the prior year's actual level and state aid will remain the dominant revenue source.
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.