Fitch Ratings assigns its 'AAA' rating to Roma
Independent School District, TX's (the district) approximately $23
million unlimited tax school building bonds, series 2006, based on a
guarantee by the Texas Permanent School Fund (PSF) whose insurer
financial strength is rated 'AAA' by Fitch Ratings. In addition, Fitch
assigns a 'BBB+' underlying rating to the bonds and affirms the 'BBB+'
underlying rating to the district's $28.2 million in outstanding
unlimited tax bonds. The bonds are scheduled to sell the week of Aug.
21 via negotiation to Raymond James & Associates, Inc. The Rating
Outlook is Stable.
The bonds are direct obligations of the district payable from a continuing ad valorem tax levied by the district without legal limit as to rate or amount on all the taxable property within the district. The bonds are also secured by a guaranty from PSF. Bond proceeds will finance the construction and equipping of various school facilities and pay costs of issuance.
The underlying 'BBB+' rating reflects management's success in restoring and maintaining the district's favorable financial position. The district's plan to maintain a three-month reserve helps to ensure the continuation of positive operating results and adequate liquidity. The rating also incorporates the significant level of state support for operations and debt service as well as the risks associated with a limited and concentrated tax base and economy and weak tax collections.
The district is located in south Texas in Starr County along the U.S.-Mexican border. Although still sparsely populated, the 490-square-mile county continues to experience population growth. The county's economy is limited and based on agriculture and mineral production, including natural gas. Typical of many Texas border communities, unemployment rates are very high and wealth indicators are well below state and national norms.
Also typical of the border region, current property tax collections are weak, although total collections rates have more acceptable levels. Accounting for a large portion of its tax base, mineral values have experienced both positive and negative fluctuations over the last several fiscal years, affecting the district's taxable assessed valuation (TAV). Recently, however, increased mineral valuation has boosted the district's TAV in fiscals 2005 and 2006 and further gains of around 19% are expected for fiscal 2007.
Operating results have improved dramatically since fiscal 1996, when the district incurred an $8 million fund balance deficit resulting from a board decision to expend $7 million in overallocated state aid payments. Subsequently, the district entered into a deficit reduction agreement with the state and implemented state recommendations regarding staffing levels, tax rates, and tax base and enrollment projections. The district was able to eliminate its deficit by fiscal 1998.
Since that time, the district has rebuilt general fund reserves, with fiscal 2005 results including a nearly $16 million balance, representing over 40% of expenditures, transfers out, and other uses. Continuing its favorable financial performance, district officials preliminarily anticipate a $3 million surplus for fiscal 2006. Officials plan to maintain a three-month reserve.
Roma ISD is considered a 'property-poor' district and receives substantial state support. State program revenues provide about 73% of operating revenues. In addition, the state provides significant debt service assistance (including the current offering). Approximately 82% of the district's general obligation (GO) debt service is funded by the state (GO bonds rated 'AA+' by Fitch). After adjusting for state support, debt ratios are moderate; however, payout is below average.
The current offering, approved by more than 90% of district voters, will fund the construction of a new elementary and middle school. Previously, no additional borrowing needs were expected for at least the next several years. However, in an effort to improve academic performance during student transition years (grades 5, 7, and 9), especially given the number of economically disadvantaged and at-risk students, the district opted to approach voters for additional authorization in an effort to reduce school enrollments and reconfigure grades served by existing facilities.
Subsequent to this issue, the district expects to fund additional capital needs from pay-as-you-go sources at least for the foreseeable future.
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 direct obligations of the district payable from a continuing ad valorem tax levied by the district without legal limit as to rate or amount on all the taxable property within the district. The bonds are also secured by a guaranty from PSF. Bond proceeds will finance the construction and equipping of various school facilities and pay costs of issuance.
The underlying 'BBB+' rating reflects management's success in restoring and maintaining the district's favorable financial position. The district's plan to maintain a three-month reserve helps to ensure the continuation of positive operating results and adequate liquidity. The rating also incorporates the significant level of state support for operations and debt service as well as the risks associated with a limited and concentrated tax base and economy and weak tax collections.
The district is located in south Texas in Starr County along the U.S.-Mexican border. Although still sparsely populated, the 490-square-mile county continues to experience population growth. The county's economy is limited and based on agriculture and mineral production, including natural gas. Typical of many Texas border communities, unemployment rates are very high and wealth indicators are well below state and national norms.
Also typical of the border region, current property tax collections are weak, although total collections rates have more acceptable levels. Accounting for a large portion of its tax base, mineral values have experienced both positive and negative fluctuations over the last several fiscal years, affecting the district's taxable assessed valuation (TAV). Recently, however, increased mineral valuation has boosted the district's TAV in fiscals 2005 and 2006 and further gains of around 19% are expected for fiscal 2007.
Operating results have improved dramatically since fiscal 1996, when the district incurred an $8 million fund balance deficit resulting from a board decision to expend $7 million in overallocated state aid payments. Subsequently, the district entered into a deficit reduction agreement with the state and implemented state recommendations regarding staffing levels, tax rates, and tax base and enrollment projections. The district was able to eliminate its deficit by fiscal 1998.
Since that time, the district has rebuilt general fund reserves, with fiscal 2005 results including a nearly $16 million balance, representing over 40% of expenditures, transfers out, and other uses. Continuing its favorable financial performance, district officials preliminarily anticipate a $3 million surplus for fiscal 2006. Officials plan to maintain a three-month reserve.
Roma ISD is considered a 'property-poor' district and receives substantial state support. State program revenues provide about 73% of operating revenues. In addition, the state provides significant debt service assistance (including the current offering). Approximately 82% of the district's general obligation (GO) debt service is funded by the state (GO bonds rated 'AA+' by Fitch). After adjusting for state support, debt ratios are moderate; however, payout is below average.
The current offering, approved by more than 90% of district voters, will fund the construction of a new elementary and middle school. Previously, no additional borrowing needs were expected for at least the next several years. However, in an effort to improve academic performance during student transition years (grades 5, 7, and 9), especially given the number of economically disadvantaged and at-risk students, the district opted to approach voters for additional authorization in an effort to reduce school enrollments and reconfigure grades served by existing facilities.
Subsequent to this issue, the district expects to fund additional capital needs from pay-as-you-go sources at least for the foreseeable future.
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.