TEXT-Fitch affirms Regional School District 12, Conn. GOs at 'AA+'
Jan 31 - Fitch Ratings has affirmed the following unlimited tax general obligation (GO) bonds for the Regional School District No. 12, CT (the district): --$100,000 GO bonds, series 1993, at 'AA+'; --$400,000 GO bonds, series 2000, at 'AA+'. The Rating Outlook is Stable. SECURITY The bonds are a general obligation of the district and of the member towns of Washington, Roxbury, and Bridgewater, CT. The district has no independent taxing power, but the member towns have the ability and obligation to levy property taxes without limit to meet this general obligation. SENSITIVITY/RATING DRIVERS RATING RELIES ON MEMBER TOWNS' CREDIT QUALITY: The 'AA+' rating reflects the high wealth levels, strong financial flexibility and low debt levels of each of the member towns. GOOD COOPERATION AMONG TOWNS, DISTRICT: The member towns' sound financial positions support balanced district operations. School expenditures represent the majority of town spending; historically strong cooperation between the member towns and the district has resulted in overall town support for the annual district budgets. LIMITED DISTRICT FINANCES OFFSET BY TOWN SUPPORT: The district's operations are tightly balanced, and state statutes limit the extent of the district's reserves. However, Fitch believes the financial flexibility provided by spending flexibility and the potential for mid-year assessments from the town offsets these concerns. STRONG ECONOMIC PROFILE: District economic indicators are strong, wealth levels are very high, and unemployment rates are well below state and national levels. LOW DEBT BURDEN: District debt levels are low with rapid debt amortization and limited future debt needs. Total expenditure levels associated with debt service, pension contributions, and other post-employment benefit (OPEB) payments are manageable. CREDIT PROFILE: The district, formed in 1967, is located northeast of Danbury (GO bonds rated 'AAA' by Fitch) and west of Waterbury (GO bonds rated 'A+' by Fitch) and consists of three small, wealthy towns - Washington, Roxbury, and Bridgewater. STRONG SOCIOECONOMIC PROFILE The district serves K-12 students and owns and operates the Shepaug Valley Middle/High School and operates three elementary schools under lease agreements with its member towns. The district's estimated population is 7,895, up 4.5% from 2000, but student enrollment has been declining with its current level at 931 students, down from 1,161 in 2004. Enrollment is projected to continue to decline due to the aging population. The member towns are primarily residential and exhibit high wealth levels by all measures. Unemployment levels are below state and national levels. SOUND FINANCIAL MANAGEMENT The district derives approximately 91% of its general fund revenues from its assessments charged to member towns proportionately, based on the number of enrolled students. State statutes require surpluses to be either refunded or credited to member towns, or reserved for capital expenses, sick and severance costs, or OPEB, thus limiting the extent of overall district reserve levels. As a result, the district reported a fiscal 2012 general fund unrestricted balance (the sum of unassigned, assigned, and committed fund balances under GASB 54) of $192,229 or 0.8% of expenditures and transfers out. If any member town fails to budget for its assessment to the district, the regional school board may petition the superior court to determine the alleged deficiency and order such town to pay its assessment, plus an additional 25% to the district as soon as it is available. By not paying its assessment a member town would suffer the future withholding of state aid to pay for default and its obligation for debt service does not go away if it withdraws from the district. The district has been active in controlling spending to maintain balanced budgets. The fiscal year 2013 budget represented an increase of about 0.46% from fiscal 2012, and included increased spending in the areas of property and program improvements of approximately $245,000. The district's intent is to use these funds to increase technology access and to comply with the state's initiative to evaluate students through a computerized process. The strong financial position of the three member towns supports district financial balance. The towns' operations through fiscal 2011 each feature over 15% of unrestricted general fund balances as a percentage of spending, strong taxpayer collection rates, diversified tax bases, and ability to raise property taxes if needed. In addition, good cooperation between the district and member towns, is demonstrated by annual support for district budgets. The member towns have approved the budget on the first try for the past several years. LOW DEBT BURDEN Overall debt levels are low with debt per capita at $403 and debt to fiscal 2011 taxable assessed value at 0.1%. These ratios include a $2.5 million GO private bank loan issued in 2012 to refinance bond anticipation notes (BANs) issued for school building repairs and improvements. The district has no future debt plans. PENSION AND OPEB MANAGEABLE The district administers a single-employer, non-contributory, defined benefit plan and has historically contributed greater than 100% of its annual required contributions (ARC). The contribution in fiscal 2012 totaled $258,583, which was equal to 122% of the ARC and 1.1% of general fund spending. As of July 1, 2012, the plan was 95% funded using a 7% discount rate assumption. The unfunded actuarial accrued liability for the plan was $211,009. The district did not contribute to OPEB in fiscal 2012 as it only offers an implicit rate subsidy. 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 Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, and the National Association of Realtor. 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