Fitch Ratings has affirmed the following outstanding bonds for Birdville Independent School District, Texas (the district) as part of its continuous surveillance efforts:
--$238 million general obligation unlimited (ULT) bonds at 'AA+'.
The Rating Outlook is Stable.
RATING RATIONALE:
--The district's financial position is a credit positive, characterized by stable and sizeable reserve levels;
--Tax base growth flattened in fiscal 2010 and modestly declined in fiscal 2011, reversing typically healthy rates of growth;
--The district benefits from its proximity to the larger Fort Worth economy and employment base, which has fared relatively well during the national recession;
--Debt levels are moderately high. Amortization is above average. Despite recent enrollment gains, capital needs remain manageable.
KEY RATING DRIVER:
--Solid reserves must be maintained to offset the operating pressures associated with recent enrollment growth.
SECURITY:
The bonds are secured by an unlimited ad valorem tax pledge of the district as well as a guaranty from the Texas Permanent School Fund.
CREDIT SUMMARY:
The district is located in Tarrant County, north of Fort Worth and near the Dallas/Fort Worth International Airport. Its 42-square mile service area includes the cities of North Richland Hills, Haltom City, Richland Hills, and Watauga, as well as a portion of the city of Hurst. While unemployment levels in Tarrant County have risen in light of overall weaker economic conditions, they remain comparable to the larger metro area and state at 7.9% in September 2010, but below the national level of 9.2%. Recent enrollment trends in this mature district reflect annual growth of 2%-3%, which is in contrast to previous years of modest declines and due in large part to the newly implemented open enrollment policy for non-district students. Currently, enrollment is at approximately 23,500 students, the largest in district history.
The district's tax base is primarily residential in nature and serves as a bedroom community for the greater metropolitan area. Historically healthy tax base growth that has averaged roughly 5% annually flattened in fiscal 2010 to about 1% and subsequently declined modestly in fiscal 2011 by about 3.5%, bringing the tax base to a still sizeable $7.4 billion. Although less than 1% of its taxable values, the district has experienced growth in mineral values since fiscal 2007 as various properties within the district's tax base have been found to be in workable portions of the Barnett Shale, one of the largest natural gas fields in the U.S.
The district's financial position remains strong, characterized by stable and sizeable reserves that are typically in excess of the district's established policy to maintain a minimum of 20% of spending in general fund reserves. Actual financial performance generally outperforms budgeted numbers due to management's conservative budgeting practices. Fiscal 2010 was no exception with the district closing the year with a modest operating surplus and a net $1.6 million addition to general fund reserves, bringing the unreserved general fund balance up to $47.7 million or approximately 32% of spending. Liquidity, while down from the prior year, remained substantial at $38 million or just over three months of general fund spending. The fiscal 2011 general fund operating budget of approximately $163 million was adopted with a roughly $1 million drawdown, however, according to management, break-even operations are currently projected, due in part to higher than budgeted actual enrollment.
Overall debt levels are moderately high at 4.9% of market value (roughly $3,150 per capita). Approximately 60% of the district's direct debt is retired in 10 years on a non-accreted basis. Management reports no firm, additional debt plans at this time and may instead choose to approach voters for an increase to the operating tax in the near term.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in the report 'Tax-Supported Rating Criteria', this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc, and IHS Global Insight.
Applicable criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 16, 2010);
--'U.S. Local Government Tax-Supported Rating Criteria' (Oct. 8, 2010).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
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Fitch Ratings
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Rebecca C. Moses, +1-512-215-3739
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Senior Director
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Cindy Stoller, +1-212-908-0526
Email: cindy.stoller@fitchratings.com