TEXT-Fitch affirms Wylie ISD, Texas' GOs at 'AA-'

Fri Sep 28, 2012 2:22pm EDT

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Sept 28 - Fitch Ratings affirms its 'AA-' rating on the following Wylie
Independent School District, Texas' (the district) unlimited tax (ULT) bonds:

--Approximately $174.7 million in outstanding ULT bonds

(excluding Series 2012B and Series 2012C).

The Rating Outlook is Stable.

SECURITY
The bonds are payable and secured from an unlimited property tax levy against
all taxable property within the district. The bonds are also insured as to
principal and interest repayment from a guaranty provided by the Texas Permanent
School Fund (guaranty rated 'AAA' Stable Outlook by Fitch).

KEY RATING DRIVERS

SOUND FINANCIAL POSITION DESPITE STATE CUTS: Solid reserves and healthy
liquidity characterize the district's sound financial position. State funding
cuts for fiscal 2012 and 2013 were proactively addressed by district management
with significant spending cuts. As a result, another operating surplus is
projected by the close of fiscal 2012, assisted by management's conservative
budgeting practices.

ECONOMY BENEFITS FROM METRO AREA: The district is favorably positioned in the
diverse Dallas-Fort Worth (DFW) metro economy and employment base near major
transportation routes. At 6.8% as of July 2012, Collin County unemployment
remains below the metro (7.4%) and state (7.5%), respectively, in line with
historical trends.

BETTER THAN AVERAGE SOCIOECONOMIC METRICS: Area income and wealth levels are
generally above state and national averages.

SLOWED TAX BASE AND ENROLLMENT GROWTH: Taxable assessed valuation (TAV) growth
has been modest to flat in the last four fiscal years (fiscals 2010 - 2013) due
largely to the recession and subsequent effect on the housing market. Enrollment
gains also have moderated but remain healthy at 3% - 4% annually. This is in
contrast to prior years' rapid TAV and enrollment gains realized as the district
evolved into an affordable suburb. Looking ahead, recent demographic studies
anticipate a moderate, stable pace of enrollment growth through build-out with a
reduced level of total students based on current development trends.

HIGH DEBT LEVELS AND LIMITED CAPACITY: Typical of rapid growth Texas school
districts, the overall debt burden is high and the debt service tax rate,
although unlimited, is above average as well. Fitch expects the debt burden to
remain high over the near-term and the capacity to issue new debt under the
state's test of $0.50 per $100 TAV strained under conservative TAV growth
scenarios and within the district's current debt profile. Nonetheless, Fitch
takes some comfort from recent demographic studies that anticipate full
build-out of the district at a reduced number of total students, which should
alleviate some of the district's facility needs going forward.

CREDIT PROFILE

DALLAS-FORT WORTH METRO DISTRICT
The district is located in Collin County, 23 miles northeast of Dallas and
within commuting distance of the cities of Plano, Garland, and Richardson, as
well as downtown Dallas. Rapid population and student enrollment increases have
occurred over the past decade given the northern expansion of the DFW metro
area. Improvement of nearby transportation corridors as well as the growing
saturation of the larger neighboring communities of Plano, Richardson, and
Garland has enhanced the district's attractiveness as a suburb. The local
economy has largely shifted from an agricultural area to one with an emphasis
primarily on residential with some commercial and light manufacturing. County
income and wealth metrics typically better those of the metro, state, and U.S.

MODERATED TAV AND ENROLLMENT GAINS SUSTAINED
District TAV expanded rapidly in recent years given the aforementioned
development trends, nearly quadrupling to the $3 billion reached in fiscal 2009
from just $865.4 million in fiscal 2001. During this period, TAV grew at double
digit rates annually. However, the subsequent impact of the recession and
housing market collapse saw a much reduced TAV gain of 2.5% in fiscal 2010,
which began a trend of modest to flat TAV annual growth that has continued
since. Management anticipates a 1% gain in fiscal 2013.

Similar to TAV gains, enrollment also grew rapidly, up to roughly 12,000
students in fiscal 2010 from only 4,600 in fiscal 2001. Since 2010, the pace of
annual enrollment growth has remained slowed to a more sustainable 3% - 4% in
light of the lingering housing slowdown. Management anticipates a fairly
comparable, steady pace of annual enrollment expansion through build-out (around
2020) to a total of roughly 17,000 students, down from prior estimates of 25,000
students. This notable change is attributed to current development trends
captured in the most recent demographic study that include a shift towards
larger, higher-end homes in the district.

SOUND FINANCIAL POSITION A CREDIT STRENGTH
State aid provides the largest portion of the district's operating revenues at
roughly 57% in fiscal 2011. Most of the district's remaining revenues are
derived from local property taxes with the operating tax rate of $1.17 per $100
TAV at the maximum allowed by state statute. The district closed fiscal 2011
with a very healthy operating surplus of nearly $2.3 million, which was in line
with prior years' financial performance and the ninth operating surplus over the
last eleven audited fiscal years. The unrestricted general fund balance
increased to nearly $16 million or approximately 18% of spending. Since fiscal
2009, reserves have remained comfortably above and in compliance with district's
12% (1.5 months) minimum fund balance policy. Liquidity improved as well in
fiscal 2011 and cash/investments rose from $20.3 million to $25.6 million,
representing about 3.5 months of general operational spending.


Management has proactively addressed proposed state funding cuts for the
biennium (fiscals 2012 and 2013) under a worst case funding loss scenario of $8
million per year. Significant spending cuts were implemented for fiscal 2012
that included reduction of workforce through attrition and a 20% cut to
departmental budgets. Actual state funding cuts have not been as steep at $5.7
million in fiscal 2012 ($6.2 million in cuts are expected for fiscal 2013).

The district also received about $2 million in EduJobs funds in fiscal 2012 that
provided a modest offset to general fund spending. In conjunction with
conservative budgeting practices, management expects to close fiscal 2012 with
the addition of approximately $5.3 million to general fund reserves, bringing
the total balance up to slightly over $21 million or about 23.5% of spending.

For fiscal 2013, a modest surplus is also expected. Spending is budgeted to rise
to $92.8 million or about 4% over the prior year due largely to a one-time,
across the board 3% pay increase. Management reports operations remain in line
with budgeted projections and higher than budgeted actual enrollment trends
realized to date should generate additional state revenue. The district's
current five-year financial forecast projects balanced operations through fiscal
2016 with the expectation of reserve maintenance at the district's 12% policy.

HIGH DEBT BURDEN REMAINS; SOME REDUCTION OF CAPITAL PRESSURES EXPECTED
The district's debt position remains weak. Overall debt ratios are high and
approximate $5,620 per capita or 8.3% of market value even after adjusting for
state aid equal to nearly 30% of outstanding debt. Amortization is average at
52% of principal repaid in ten years. The district's direct debt burden is
expected to remain high for the foreseeable future as outstanding district debt
includes a sizeable amount of capital appreciation bonds, which minimize
near-term tax rate impacts and shift the debt burden to future taxpayers.
However, Fitch takes some comfort that future capital pressures should lessen
given the reduced number of total students now projected at build-out.

Included in the district's outstanding debt are bonds issued from a $21 million
bond authorization recently approved to fully complete the second high school's
interior; these bonds are not rated by Fitch. Fitch views the passage of the
bond authorization favorably as prior bond elections for this project had
failed, which could have led to the possibility of a large, impaired asset for
the district.

The district's debt service tax rate is a high $0.47 per $100 TAV and slightly
below the state cap for new debt issuance. The debt service schedule rises
somewhat gradually from $19 million in fiscal 2013 to maximum annual debt
service of $26 million in 2026. Over the near-term, management does not expect
to seek further GO authorization for at least the next two years given current
capacity in existing schools and reduced enrollment projections. Fitch will
monitor the district's debt and tax rate position for additional stress, noting
that management's ability to provide sufficient classroom capacity with
shrinking debt flexibility will be a key credit consideration.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

In addition to the sources of information identified in the Tax-Supported Rating
Criteria, this action was additionally informed by information from Creditscope,
University Financial Associates, and LoanPerformance, Inc.

Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012).
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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