TEXT - Fitch affirms California's Placer Union High School District

Wed Feb 6, 2013 3:27pm EST

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Feb 6 - Fitch Ratings has affirmed the following ratings for Placer Union
High School District (the district):

--$17.1 million general obligation (GO) bonds, 1999 series B & C, at 'AA';
--$1.4 million certificates of participation (COPs) series 2003 at 'AA-'.

The Rating Outlook is Stable.

SECURITY 

The GO bonds are secured by an unlimited ad valorem tax. The COPs are secured by
lease payments subject to annual appropriation by the district.

SENSITIVITY/RATING DRIVERS

HEALTHY FINANCIAL PROFILE: The district maintains consistently positive 
operating margins, strong reserve levels, and ample liquidity.

REDUCED RISKS FROM STATE DISTRESS: The November 2012 approval of Proposition 30 
by California voters removed the threat of mid-year funding cuts for the 
district. The governor's proposed fiscal 2014 state budget presents a more 
favorable fiscal future for K-12 school districts. 

LIMITED ECONOMY: The district's primarily residential economy is limited, but 
district residents benefit from their proximity to economic opportunities in 
Placer County and Sacramento. Socioeconomic indicators are average.

MANAGEABLE LONG TERM OBLIGATIONS: Debt levels are low. Pension and other 
post-employment benefit costs (OPEB) are not expected to pressure the credit due
to affordable carrying costs. 

APPROPRIATION RISK: The 'AA-' rating on the COPs reflects the district's general
creditworthiness, the inherent appropriation risk, and the essentiality of the 
assets under the lien.

CREDIT PROFILE

Located about forty miles north of Sacramento, the district encompasses 
approximately 990 square miles and includes the cities of Auburn, Foresthill, 
Loomis, Meadow Vista, Colfax, and many unincorporated areas of Placer County. 
The district serves over 4,000 students. 

HEALTHY FINANCIAL PROFILE 

The district has maintained operating surpluses in each of the last few years 
despite the recessionary environment. The district derives a relatively high 54%
of its revenues from property taxes, which minimized the district's exposure to 
state deferral risk. The district ended fiscal 2012 with a $1.8 million net 
operating surplus, which represents 4.8% of total general fund spending. 

The district maintains strong reserve levels. In fiscal 2011, GASB 54 
consolidated existing discretionary special funds with the general fund. Fiscal 
2012 unrestricted fund balance (sum of the unassigned, assigned and committed 
funds) is a robust 45% of total general fund spending. 

With the passage of state Proposition 30, which temporarily increases state 
income and sales taxes, districts were spared mid-year funding cuts in fiscal 
2013. The district avoids a $1.8 millioon cut from the state, as a result. The 
first interim report assumes the passage of Proposition 30 but still projects a 
$2.2 million deficit (6% of total general fund spending) due to conservative 
budgeting and projected decreases in enrollment. Fitch expects close to 
break-even operations based on expected savings and enrollment figures. 

LIMITED ECONOMY WITH AVERAGE SOCIOECONOMICS

The district's local economy is limited since it is mostly residential or 
undeveloped. However, this is somewhat mitigated by the district's location 
within Placer County, which has been one of the fastest growing counties in the 
state in the last decade. Top county employers include Kaiser-Permanente and 
Hewlett-Packard. The district also benefits from its commutable proximity to 
Sacramento.

The district's socioeconomics are average. Median household income in 2011 
equals 108% and 126% of state and national averages, respectively. Placer 
County's unemployment rate of 8.9% in October 2012 is lower than the state 
unemployment rate of 9.8% but higher than the national unemployment rate of 
7.5%. Educational attainment levels are on par with national averages. District 
population growth trails the national average, despite being within the faster 
growing Placer County. Assessed value (AV) has been falling over the last 
several years but Fitch expects AV to stabilize in fiscal 2013, due to a 
turnaround in home sales.

MANAGEABLE DEBT AND LONG-TERM LIABILITIES 

Overall debt levels are low at $1,107 per capita and 0.9% of assessed value. 
Amortization is a moderate 53% of principal retired in 10 years. 

The district participates in two state pension plans, the California Public 
Employees' Retirement System and the California State Teachers' Retirement 
System (CalSTRS). While the district contributes 100% of the required 
contribution for each system, CalSTRS is funded on a statutory basis which in 
recent years has been substantially less than the actuarially required 
contribution. The district's required contributions was equal to a manageable 
5.5% of total general fund spending; however, given the poor funded ratios for 
both plans, Fitch expects increasing costs for participants in the future.

OPEB costs are very manageable and represent 0.4% of total general fund 
spending. Total carrying costs for debt service, pension, and OPEB costs equal a
low 13.7% of governmental spending (net of capital projects funds).
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