Nov 13 - Fitch Ratings affirms its underlying 'A-' rating on Edcouch-Elsa
Independent School District, Texas' (Edcouch-Elsa ISD or the district)
outstanding unlimited tax (ULT) bonds as follows:
--Approximately $46.2 million in outstanding ULT bonds.
The Rating Outlook is Stable.
The bonds are secured by an unlimited ad valorem tax pledge of 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
STABLE FINANCIAL POSITION: Management projects maintaining healthy reserves at
year-end fiscal 2012 despite the year's state funding cut and a $1.2 million
drawdown. District officials target maintaining no less than two months of
spending in reserves (around $7 million). The fiscal 2013 operating budget is
LOCAL CONTROL FULLY RESTORED: The recent end of state conservatorship
demonstrates confidence in district management and the state's expectation of
adherence to improved, conservative financial practices.
SUB-PAR LOCAL ECONOMY, TAX BASE: The local economy and tax base are limited in
scope, tax collections are very weak and area wealth levels are well below
MODEST ENROLLMENT DECLINES: Annual enrollment has averaged a 2% decline since
MODEST LONG-TERM LIABILITIES: Debt levels are modest, assisted by substantial
state support. Capital needs appear manageable. Management reports no immediate
debt plans, although a future GO bond election is under consideration.
WHAT COULD TRIGGER A RATING CHANGE
As state conservatorship has recently ended, Fitch believes it is likely local
management will be challenged to maintain the fiscal discipline and conservative
budgeting practices necessary to sustain healthy liquidity and reserve levels.
Evidence of a return to materially weaker financial operations and position
would likely lead to negative rating action. Conversely, a consistent trend of
improved performance would be viewed favorably by Fitch.
IMPROVED, STABLE FINANCIAL POSITION
The district receives the majority of its operating revenue (83%) from state
aid. Fiscal years 2010 and 2011 results reflected a stable and improved
financial position, built upon the modestly positive results realized in fiscal
2009. The district regained its financial footing under a new management team
that was required to work in collaboration with the state conservator appointed
by the Texas Education Agency (TEA) in 2008 after a multi-year period of weak
financial performance. Improved financial management practices (such as
Board-approved staffing ratios and more conservative budgeting) allowed district
management to right-size revenue estimates and realize expenditure savings after
a mid-year workforce reduction in fiscal 2009. In addition, the district
benefitted from the receipt of nearly $3 million in federal ARRA and EduJobs
funds in fiscal 2010 that served to offset some of the year's general fund
spending and better prior year-end projections. Fitch notes that the district's
improved general fund balance position over fiscals 2009-2011 was also augmented
by the total of approximately $5.7 million in one-time revenue received from
lawsuit settlements on construction deficiencies in various school facilities.U.S. Local Government Tax-Supported Rating Criteria