AUSTIN, Texas--(Business Wire)--
During the course of routine surveillance, Fitch Ratings has upgraded the rating
for St. Tammany Parish Wide School District No. 12, Louisiana general obligation
(GO) bonds to 'AA-' from 'A'. This action affects $1.95 million in outstanding
series 1998B debt. The Rating Outlook is revised to Positive from Stable.
Fitch takes this action in response to the solid financial performance of the
district in the three fiscal years completed since Hurricane Katrina struck
southeast Louisiana in 2005. In addition, the upgrade incorporates enrollment
levels that have returned to pre-Katrina levels, the prospect of federal funding
for most if not all of the district's rebuilding program, and the ongoing
economic recovery in St. Tammany Parish. The primary credit concern is the
lingering uncertainty surrounding the long-term recovery of New Orleans, and how
a less than full recovery might negatively impact neighboring communities
including those in St. Tammany Parish. Fitch believes further upward movement in
the rating is likely if federal reimbursement of reconstruction costs occurs as
anticipated and the district maintains its solid financial position.
St. Tammany Parish is located north of New Orleans in southeast Louisiana,
adjacent to the north shore of Lake Pontchartrain. District facilities suffered
significant damage during Hurricane Katrina in 2005, with all campuses receiving
some damage and five campuses requiring complete reconstruction. Rebuilding
efforts continue, with repairs completed on all but three campuses that were
extensively damaged. Enrollment for 2009 was about 35,700, slightly above
pre-Katrina enrollment totals. The district, which serves all of St. Tammany
Parish, currently has 53 schools and employs more than 3,000 teachers.
The district's financial profile, which historically was a credit strength,
remained sound over the past four fiscal years despite the need to apply
significant amounts of available reserves to clean-up, repair and reconstruction
projects. Unreserved general fund balances, which historically exceeded 20% of
spending, declined moderately since fiscal 2005 but remain healthy at between
15% and 20%. The district actually received a sizable boost in revenues
post-Katrina, as local rebuilding efforts generated a nearly 40% increase in
district sales tax revenues in fiscal 2006. While sales tax receipts have
recorded modest declines the past two fiscal years, collections remain well
above pre-Katrina levels. Sales tax revenues totaled $83.9 million in fiscal
2008, compared to $65.4 million in fiscal 2005. In addition, property tax
collections remained high following the storm, and the state boosted its
financial support by nearly $25 million from fiscal 2006 to fiscal 2008.
For fiscal 2008, the district's general fund reported a decline in reserves of
$15.9 million, but this loss resulted from the transfer out of $17 million in
unspent bond proceeds for construction projects. The unreserved fund balance at
year-end totaled $55.8 million, or nearly 16% of spending and transfers out. For
fiscal 2009, district officials anticipate positive results and an increase in
reserves of roughly $2 million, as a further decline in sales tax receipts is
expected to be offset by increasing property tax revenues and additional state
funding.
Reconstruction costs for district facilities are estimated at $123 million, and
the district expects full reimbursement of these outlays by the federal
government. To date, district officials report that more than $50 million in
reconstruction expenses have been reimbursed. The district's direct debt ratios
are moderate at about $1,350 per capita and nearly 1.7% of estimated market
value. Payout of outstanding GO debt is well above average with more than 70%
retired in ten years. In 2008, 68% of district voters approved $167 million in
bonding authorization for two new campuses and 14 major renovation projects. The
district has sold $87 million of this authorization to date, and expects to sell
bonds again in January 2010 and annually for the following three years. The
entire authorization is expected to have minimal impact on the district's debt
service millage rate.
The St. Tammany Parish economy has rebounded smartly from the effects of
Hurricane Katrina, as the parish benefited from population and business
relocation from the areas to the south that are more at risk to hurricane
damage, including Orleans, Plaquemines and St. Bernard parishes. Parish labor
force and employment totals now exceed pre-2005 levels, and at 4.1% the April
2009 parish unemployment rate was well below the state (5.6%) and national
(8.6%) averages for the month. The official parish population estimate for 2008
is about 226,000, although local officials believe the population exceeds
250,000. The 2004 parish population was about 211,000. As is the case for other
entities in the region, the principal longer term challenge for the district is
the future of New Orleans and its potential impact on area businesses and
residents. The uncertainty surrounding the long-term recovery in New Orleans
poses potential challenges for the district, given that the city historically
has been the economic engine for the entire region.
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, New York
Steve Murray, +1-512-215-3729 (Austin)
Jose Acosta, +1-512-215-3726 (Austin)
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com
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