Jan 23 - Fitch Ratings has taken the following rating actions on outstanding
Ennis Independent School District, Texas (the district's) bonds:
--$147 million unlimited tax (ULT) bonds affirmed at 'AA-'.
The Rating Outlook is Stable.
The bonds are direct and general obligations of the district payable from a
continuing direct annual ad valorem tax levied by the district without limit as
to rate or amount. Additionally, the bonds are secured by the Texas Permanent
School Fund (bond guarantee program rated 'AAA' by Fitch).
KEY RATING DRIVERS
CONSISTENT FINANCIAL PERFORMANCE: The district's financial performance is a
credit positive, characterized by consecutive years of operating surpluses and
HIGH OVERALL DEBT: Above-average overall debt reflects previous levels of
healthy enrollment growth culminating in a recently completed construction
program. The district's interest & sinking fund (I&S) tax rate is at the
statutory cap for new debt issuance, with no new debt plans on the horizon.
MANAGEABLE GROWTH: Enrollment is expected to remain flat for several years,
reducing pressure on the district's capital program and debt burden. Mid-term
projections indicate that existing facilities should provide adequate capacity
for 10 years.
SLOWED TAX BASE GROWTH: Flat taxable assessed valuation (TAV) since fiscal 2009
mirrors a slow-down in the local economy and housing market, although recent
economic activity should generate modest tax base gains in the near term. Top
taxpayer concentration remains above average, but Fitch derives some comfort
from the diversity of companies comprising the list.
Ennis ISD, with a population of approximately 27,200 is located approximately 35
miles south of Dallas. The district is located primarily in Ellis County (rated
'AA'/Outlook Stable by Fitch) and includes the city of Ennis, a commercial and
industrial center at the intersection of Interstate 45 and Highway 287.
MANUFACTURING CENTRIC ECONOMY
The manufacturing sector increasingly drives the regional economy; approximately
55 diverse manufacturing plants are located within Ennis. The district's top 10
taxpayers comprise a sizable 27% of TAV representing a mix of energy, utility
and manufacturing facilities (plastics, chemicals, automotive parts, envelopes,
furniture, and construction products). The top two taxpayers, CVS Distributing
and Ennis-Tractabel/Suez Power Company account for a combined 11% of TAV and
have remained among the top taxpayers for over a decade. Product/sector
diversity among the top taxpayers alleviates some of the credit concern
associated with concentration risk.
The district's fiscal 2013 market value of $2.4 billion consists of
commercial/industrial (40%), residential (26%), agricultural/ranch (19%), and
other property. TAV leveled out in fiscal 2010 following four years of 7.5%
average growth through fiscal 2009. However, officials report new residential,
commercial and industrial construction, indicating a pick-up in the pace of
local economic development which should be reflected in the tax base by fiscal
2014 and contribute to a strengthening of the local job market.
County unemployment of 6.4% as of October 2012 is improved from a year earlier
and on par with state levels for the same period. Top employers include an array
of manufacturers, energy, distribution and retail. Median household income in
the district lags, but has risen more rapidly over the past five years than
state and national levels.
SOUND FINANCIAL PERFORMANCE
The district has registered consecutive operating surpluses (after transfers)
since fiscal 2001. A fiscal 2012 operating surplus of $899,500 (2.3% of
spending and transfers out) resulted from attrition based cost savings, a salary
freeze and other budget reductions which mitigated revenue losses of $1 million
from state funding cuts, and loss of $1.9 million in ARRA monies which
subsidized fiscal 2011 operating costs. The fiscal 2012 cost savings were
adequate to also fund $218,000 of technology and vehicle purchases and further
strengthen the unrestricted general fund balance to $15.7 million, or a strong
38.7% of expenditures and transfers out.
Officials anticipate break-even fiscal 2013 results based on continued cost
management. The district also expects to fund approximately $550,000 of HVAC and
roof improvements during the year. Similarly to many districts having undergone
a period of rapid growth, Ennis ISD's M&O tax rate is at the cap of $1.04 per
$100, although the district does not report plans to seek a tax ratification
election at this time.
HIGH DEBT BURDEN
Overall debt levels are high at 7.6% of market value and $6,595 per capita.
Amortization is moderate with 54% of debt maturing in 10 years. Debt service
costs are also high at 19.9% of governmental expenditures. The district's debt
service tax rate of $0.50 per $100 of valuation represents the statutory maximum
rate under the state Attorney General's test for new debt issuance. Although
with the recent completion of major facilities projects, officials report the
district will have no facility needs requiring debt issuance for up to 10 years.
Infrastructure maintenance and vehicles are manageable at this time from a
combination of general fund and grant monies. Fitch expects I&S tax rate
pressure to ease over the medium term as tax base growth resumes.
The district contributes to the Teacher Retirement System of Texas (TRS), a
cost-sharing, multiple employer defined benefit pension plan. Additionally, the
district contributes to the Teacher Employee Recruitment and Retention Program
(TERRP), a defined contribution plan completely funded by the district. Carrying
costs, including debt service, combined pension and TERRP contributions
represent a manageable 21.2% of governmental expenditures.