Fitch Affirms Bass Lake Joint Union ESD, California's $13.5MM GOs at 'A'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings affirms its 'A' rating on Bass Lake Joint Union Elementary School
District, California's (the district) $13.5 million in outstanding general
obligation bonds (GOs). The Rating Outlook remains Stable.

The 'A+' rating reflects the district's strong unreserved general fund balance,
its relatively low reliance on state revenues, and management's cost-cutting
response to significant revenue shortfalls. The rating further reflects the
district's limited tax base of retiree communities that restricts housing market
access for young families with children, and a negative trend in student
attendance which limits the growth potential of the district's constitutionally
protected revenues derived from the state. The Stable Outlook reflects Fitch's
expectation that the district will retain sound reserves to preserve financial
flexibility.

The district's financial position is strong, with audited unreserved fund
balances of $1.6 million in fiscal 2008 (a healthy 19.8% of spending and
transfers out). On a budgetary basis, total general fund balance is projected to
decline moderately in fiscal 2010, due to decreased state funding, to $1.4
million (19.4% of spending and transfers out). In response to state revenue
shortfalls, management has acted aggressively to limit use of fund balance,
reduce the size of its teaching staff by approximately 8%, keep staff positions
vacant, and close two smaller schools to reduce overhead. The district is less
affected by large recent cuts in state support for school districts, since only
25.5% of its total general fund revenue is derived from state sources. This is a
relatively low proportion for California, particularly in a rural district.

Fitch notes that in the district's financial position could be threatened in the
long-term by potential reductions in state revenue limit funding driven by
shrinking average daily attendance, which has declined at an average annual rate
of 3.1% from fiscal 2006-2010. Management projects fiscal 2011 will see a 2.8%
decline in attendance, followed by a 2.7% rise in attendance in fiscal 2012,
which Fitch believes is optimistic.

The district encompasses approximately 289 square miles of unincorporated
communities in northern Madera County and southwestern Marisposa County. The
district is close to Yosemite National Park, and its limited economy benefits
from the tourist and service-related activity driven by the site. The district's
assessed valuation will suffer its first annual decline in FY10, falling 3.6%
from its 2009 high. Fitch data indicates that Oakhurst and Madera County are
broadly reflective of the typical California experience for housing market
distress in the state of California, as measured by quarterly mortgage
foreclosure and delinquency rates. Wealth levels show both Atwater and Merced
County have median household incomes below the state average, and suffer poverty
and unemployment rates significantly above the state median.

The district's overall debt burden is a relatively low 1.8% of assessed value in
fiscal 2009 and $2,268 per capita. There are no immediate plans to issue any
further debt, although the district will issue its remaining $5 million in
voter-approved bonds when the funding environment for state matching programs
improves.

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.

Fitch Ratings
Tom Cowell, 212-908-9130, New York
Alan Gibson, 415-732-7577, San Francisco
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com

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