Fitch Ratings takes the following action on Beeville Independent School District, Texas' (the district) unlimited tax general obligation (ULTGO) bonds as part of its continuous surveillance efforts:
--$26.3 million ULTGO bonds affirmed at 'AA-'.
The Rating Outlook is Stable.
RATING RATIONALE:
--Beeville Independent School District (the district) is located approximately 50 miles northwest of Corpus Christi, the closest metropolitan area. The local economy is fairly limited in this predominately rural, agricultural area.
--While the district's tax base has grown, it remains modest, resulting in substantial state support for debt service and operations.
--There has been minimal growth in the area's population, but it has remained stable. From a fairly small enrollment base, the district has experienced an ongoing trend of modest enrollment declines.
--Since fiscal 2003, the district has continued to maintain solid financial reserves, aided by annual staff reductions reflective of its declining enrollment base.
--The debt profile remains moderate, characterized by manageable debt levels, average principal amortization, and minimal future capital needs.
--The area's wealth levels are below state and national averages.
KEY RATING DRIVERS:
--The district's ability to maintain healthy general fund reserves and manage expenditures will be critical in the near term, as future legislative action on public school funding may apply budgetary pressure.
SECURITY:
--The bonds are direct obligations of the district, secured by an unlimited ad valorem tax levied against all taxable property within the district. The bonds are further secured by the Texas PSF guaranty.
CREDIT SUMMARY:
This predominately rural district is located in Bee County, approximately 90 miles southeast of San Antonio and 50 miles northwest of Corpus Christi, encompassing almost 350 square miles. The local economy is based on agriculture, oil and gas production, and related commercial activities. Government and retail trade are the largest non-agricultural employment sectors. Bee County unemployment levels have historically been above those of the state since 2004, the October 2010 unemployment rate maintained this trend at 10%. Wealth levels are below those of the state; however, this is somewhat mitigated by the lower cost of living of the region. Not quite half of the district's tax base is residential, with the next largest portion (approximately 30%) consisting of acreage. Despite its sporadic annual growth from fiscal 2006 to 2010, the district's taxable assessed valuation (TAV) averaged annual gains of almost 9% during this time period.
Ever since the closure of the city's naval airfield (Chase Field) in 1993, the area's population has had moderate but steady declines at an average annual rate of less than 1%. Ongoing demographic patterns associated with the oil and gas industry have also led to modest enrollment declines. With a small annual enrollment of approximately 3,530 students in fiscal 2010, the district's enrollment has fluctuated in recent years and declined at a rate of less than 2% on average annually since fiscal 2004. District officials project flat to declining enrollment growth rates over the near term.
The district has maintained solid financial reserves since fiscal 2003 and audited results for fiscal 2010 continued that trend. The district reported a very healthy unreserved general fund balance of $9.9 million or 43% of spending in fiscal 2010, which exceeded the district's operating reserve policy level of at least three months of expenditures. District officials anticipate closing fiscal 2011 with a modest surplus. Preliminary information regarding fiscal 2012 includes an approximate 10% cut in state funding due to the state budget shortfall. District officials are preparing for this loss in state funding, which amounts to approximately 7% of total revenue, by cutting spending accordingly to achieve balanced results in 2012.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's 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' (Oct. 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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