Fitch Rates West Contra Costa USD, California's $30MM GOs 'A-'; Outlook Negative

SAN FRANCISCO--(Business Wire)--
Fitch Ratings assigns an 'A-' rating to West Contra Costa Unified School
District, California's $30 million election of 2005, series D and D-1 general
obligation bonds (GOs). Fitch also affirms the district's approximately $732
million in outstanding GO debt at 'A-'. The new bonds will sell by negotiation
on or around Nov. 16, 2009. The Rating Outlook on all bonds is Negative.

The 'A-' rating reflects the bonds' unlimited ad valorem tax pledge, prudent
actions by management recently to reduce expenditures, and the district's
location within the large and diverse San Francisco Bay Area employment market.
Balanced against these strengths is the district's currently adequate but
challenged financial position, exhibited by sufficient but declining fund
balances, projected deficits through at least fiscal 2012, a difficult state
funding environment with the potential for mid-year cuts, and declining
enrollment. Other weaknesses include a challenged local economy with high
unemployment and poverty levels (despite pockets of wealth), a deteriorating
real estate market, moderate tax base concentration levels with recently large
assessed valuation (AV) reductions, and high debt levels with slow amortization
and large capital needs. If unreserved fund balance levels continue to decline,
or if the local economy further weakens, with secondary effects on the
district's tax base and enrollment levels, a rating downgrade may be triggered.

The district educates approximately 29,000 students, serving a large population
estimated at 227,040 in western Contra Costa County. Its territory encompasses
the cities of Richmond (51% by assessed valuation [AV]), Hercules (12%), El
Cerrito (11%), Pinole (7%), San Pablo (7%), and unincorporated areas (12%). The
district also includes facilities of several petroleum and petroleum-related
companies; the largest is Chevron Corporation, the district's top taxpayer at
nearly 13% of AV. Despite pockets of wealthier areas, the majority of the
district is economically disadvantaged. The City of Richmond, which makes up
slightly more than half of the district, experienced a rapid rise of
unemployment to 17.9% in August compared to 10.9% the year prior. Unemployment
for the county and state stood at 11.2% and 12.1%, respectively, for the same
period. The city's median income levels similarly lag county and state levels at
67% and 86% of their averages, respectively. The local real estate market is
highly concentrated in negative amortizing and subprime loans, and foreclosure
rates are well above both state and national levels. As the result of falling
home prices and reportedly conservative action from the County Assessor to
proactively implement Proposition 8 AV reductions, AV fell by a large 12.3% in
fiscal 2010. Continued economic decline also could accelerate the district's
declining enrollment trend.

The district's financial position is adequate but budgeted to deteriorate.
Fiscal 2009 ended with general fund net income of $5 million, raising the total
fund balance to $50.8 million (18.1% of expenditures and transfers out), while
the unreserved fund balance fell by about $1.2 million to $19.8 million (7.1%).
However, the surplus includes restricted categorical carryovers, and a one-time
transfer of revenue limit funds from fiscal 2010 to fiscal 2009, which
consequently weighs on the district's current year finances. The most recently
revised budget for fiscal 2010 includes a $16 million deficit, and projections
through fiscal 2012 include further declines. Much of the revenue pressures come
from a challenging state revenue environment and several years of declining
enrollment. In response to these revenue pressures, management has prudently
made substantial expenditure reductions, including school consolidations, and
looks poised to gain from enhanced labor flexibility and modified OPEB and
health care benefits, pending a teachers' vote on a revised contract, which
management believes will be approved. Despite progress to date in reducing
expenditures, further reductions will have to be made to balance future
financial operations and prevent the unreserved general fund balance from
falling to narrow levels.

These bonds are the fourth series of a 2005 $400 million voter-approved
authorization (Measure J) under Proposition 39. Bond proceeds will be used
primarily to fund school renovation, reconstruction and modernization projects.
Series D bonds will be tax exempt, while series D-1 bonds will be issued as
qualified school construction bonds (QSCBs). Net debt levels are high at $5,541
per capita and 5.3% of AV, and amortization is slow, with a quarter of debt
maturing within 10 years. Capital needs are large, but the district's already
high tax rates and declining tax base could impair the district's ability to
finance them.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE '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, San Francisco
Scott Monroe, +1-415-732-5618
Karen Ribble, +1-415-732-5611
Media Relations, New York
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

Copyright Business Wire 2009