AUSTIN, Texas--(Business Wire)--
Fitch Ratings assigns a rating of 'AAA' to Dallas County Community
College District (DCCCD, or the district), Texas' $220 million limited
general obligation bonds, series 2008. In addition, Fitch affirms the
'AAA' rating on the approximately $30 million in maintenance tax notes
and $63 million in outstanding parity bonds. The Rating Outlook is
Stable.
Scheduled for a negotiated sale August 5, the bonds are secured by
the proceeds of a limited ad valorem tax levied against all taxable
property within the district. State statute limits a community college
district's debt service tax rate to no more than $0.50 per $100
taxable assessed valuation (TAV).
The 'AAA' rating for the district is based on diversified revenue
sources, a substantial population and tax base with steady growth, and
a large and consistent enrollment base that is drawn primarily from a
limited geographical area. Tuition and property tax rates are low
(both of which are among the lowest of community colleges in the
state) and provide added financial flexibility, which is important
given the possibility of reduced state appropriations in the next
biennium. The district continues to maintain good liquidity levels
with positive operating performance, which is in part reflective of
the strong planning processes in place for operating as well as
capital needs. Even with this issuance, DCCD maintains a moderate debt
position. Fitch believes the large capital program underway that
includes five new campuses may, however, apply some degree of pressure
to the district's operating margins and reserves over the near term.
The district's ability to manage expenditures and maintain solid
reserves consistent with this rating category is integral to
maintaining credit quality.
Coterminous with the boundaries of Dallas County, the district
encompasses 860 square miles and serves a population of almost 2.4
million. Dallas County is the ninth most populous county in the
nation. The district benefits from its central location within the
broad and diverse Dallas-Fort Worth metropolitan economy. Fiscal 2008
TAV grew nearly 9% over the prior year's level to a substantial $167.9
billion. Insurance, banking, and finance are prominent sectors of the
regional economy, as are health care, education, retail trade,
tourism, electronics, and high-technology manufacturing. The region's
geographic accessibility and extensive transportation network have led
to the development of national and international product distribution
facilities. Metropolitan unemployment rates have trended downward
since 2003, and are now comparable to state and national averages.
County socioeconomic indicators also point to above-average wealth
levels, retail sales per capita, and taxable value per capita.
DCCCD was established in 1965. Today, DCCCD has seven colleges
located throughout Dallas County and it is the largest community
college district in the state. The equivalent of 10% of the Dallas
County adult population enrolls at the district each year. Enrollment
has historically shown steady growth, trending slightly upwards since
Fall 2005, and DCCD projects average annual enrollment growth at rates
of 2%-3%. The district currently offers classes to roughly 60,000
credit students per semester. Like most community colleges, tuition
rates and open enrollment policies are attractive in recruiting
students. Tuition rates are relatively low when compared to public
four-year universities in the state. DCCCD is able to keep its tuition
affordable since approximately 65% of its revenue is derived from
property taxes and state appropriations.
General stability in the three major funding sources has
contributed to the positive operating performance of the district. The
three major funding sources for the district in fiscal 2007 are state
appropriations (31%), local property tax receipts (34%), and student
tuition (20%). From fiscal years 2002-2007, the district's operating
margins have been positive, ranging from 3.4% to 6.5%. Break-even
operations are typical for public colleges and universities. Positive
financial performance is aided by the district's conservative fiscal
management, which was evidenced in the recently adopted fund balance
policy that strengthened reserve levels from a minimum of 3 to 4
months' of spending.
The current offering represents the second phase of borrowing of a
$450 million authorization approved by over 70% of voters in May 2004.
The bond program will address system-wide improvements as well as the
creation of five educational centers located in underserved or rapidly
growing areas. The tax effect of the entire authorization is expected
to be minimal with a maximum annual debt service tax rate of $0.025
per $100 TAV, assuming modest annual tax base growth and 20-year
maturity schedules. Direct debt ratios are extremely low, but overall
ratios climb to more moderate levels due to the significant number of
overlapping units and the inclusion of large borrowers including the
City of Dallas and Dallas Independent School District (underlying GO
bond rating is 'AA', by Fitch). With this issuance, payout has slowed
to a below-average 41% of outstanding tax-supported debt retired in 10
years.
Recent state legislative changes now allow community colleges to
issue commercial paper (CP), and the DCCD Board approved its use up to
$150 million as an interim financing tool for its GO authorization in
2007. This issuance will take out the entire $125 million CP
outstanding.
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
Rebecca C. Moses, 512-215-3739 (Austin)
Steve Murray, 512-215-3729 (Austin)
Sandro Scenga, 212-908-0278 (Media Relations, New York)
Copyright Business Wire 2008
