Feb 26 - Fitch Ratings affirms its 'AA+' underlying rating for the following
Coppell Independent School District, Texas' (the district) obligations as
--$147 million unlimited tax (ULT) bonds.
The Rating Outlook is Stable.
The bonds are secured and payable by an unlimited property tax levy.
KEY RATING DRIVERS
SOLID FINANCIAL RESERVES: The district's conservative fiscal management
practices have enabled the district to build up solid financial reserves.
LARGE AND DIVERSE TAX BASE: Fitch expects the district's diverse property tax
base to grow moderately despite recent recessionary declines.
MODERATELY HIGH DEBT BURDEN WITH MANAGEABLE CAPITAL NEEDS: The district's
overall debt levels are high on a per capita basis but moderate relative to the
tax base. Principal amortization is above average. Near- to mid-term capital
needs appear to be manageable.
STRONG REGIONAL ECONOMY: The district benefits from its location in the broad
and diverse economy of the Dallas-Fort Worth (DFW) metro area. Residents have
easy access to a large employment market that continues to outperform the nation
in terms of population, employment, and income growth.
HIGH WEALTH LEVELS: Local wealth levels are well above state and national
PRESERVATION OF STRONG FINANCIAL PROFILE: Maintenance of its strong financial
profile to contend with ongoing state funding uncertainties and wealth transfer
provisions is critical to the district's strong credit rating.
The city of Coppell (the city) is located approximately 18 miles northwest of
downtown Dallas. The district serves the city and small portions of the cities
of Dallas and Irving in northwest Dallas County with an estimated population of
45,313 in 2012. After a couple of years of enrollment declines, the district's
enrollment levels resumed growth in fiscal 2010 to its current enrollment level
CONSERVATIVE MANAGEMENT GROWS FUND BALANCE RESERVES WHILE BALANCING WEALTH
The district is considered property wealthy and relies almost entirely on local
property taxes, but its funding is subject to the state formula and a portion of
the district's operations and maintenance (O&M) levy is effectively recaptured
by the state for distribution to less wealthy school districts. For fiscal 2011
and 2012, these payments totaled roughly $23 million each year, or about 25% of
total general fund spending.
Financial performance and reserve levels are very strong despite the large
recapture payments associated with the state funding formula. In September 2010
(effective fiscal 2011), the district received voter authorization to increase
its O&M tax levy from $1.04 to the maximum of $1.17 per $100 taxable assessed
value (TAV). Although some of the additional levy is transferred to poorer
school districts, the approved increase enables districts to preserve a moderate
portion of incremental taxing effort. The additional property tax revenue,
combined with the district's conservative budgeting practices and enrollment
gains, led the district to generate an $8.6 million surplus in fiscal 2011 and
another $6.6 million in fiscal 2012. For fiscal 2012, the district ended the
year with a substantial $43.7 million unrestricted general fund balance
equivalent to 47% of spending.
For fiscal 2013, the district's budget was adopted with an estimated $4.2
million general fund deficit with the assumption that the district was required
to expend roughly $20 million for wealth equalization, or recapture. However,
interim results currently point to balanced operations due to higher than
budgeted student enrollment. The district typically budgets conservatively and
has consistently generated better than budgeted results as reflected in its
substantial general fund reserve levels.
MAINTENANCE OF STRONG RESERVES TO SUPPORT RATING STABILITY
The state's school funding outlook for the fiscal 2014-2015 biennium is unclear
and will not be resolved until after the district adopts its fiscal 2014 budget.
The proposed budgets from the state government's house and senate only partially
restore previous education cuts from the 2012-2013 fiscal biennium but will
likely be amended prior to adoption of the state's budget in June. Fitch expects
the district will maintain its solid financial profile given its current
substantial fund balance.
DEBT LEVELS REMAIN MODERATERLY HIGH BUT GROWTH PRESSURES APPEAR MANAGEABLE
The district's overall debt ratio is high on a per capita basis at nearly $6,800
but moderate as a percent of market value at 3.5%, reflective of strong
commercial valuations. Approximately one-half of the district's tax base is
commercial/industrial. Debt amortization is above average with 59% of debt
maturing in 10 years. The district currently has $13.9 million in authorized
debt to be issued for technology and facilities. Voters will consider a new bond
proposal in May estimated at $65 million to $79 million for construction of new
facilities, major improvements and renovations, and technology needs.
The district's most significant growth occurred in the 1990s, and until a few
years ago, it was considered to be relatively built out with only small pockets
of land available for residential development. In 2008, a large 350-acre tract
of land around North Lake that lies within the district's property boundaries in
the city of Dallas was rezoned to residential use. Development has been delayed,
but the property is still planned to be developed in five phases over a term of
approximately 10-15 years. Although the district estimates a potential 30%
increase in student population upon full build-out, the first phase is not
expected to generate a student base increase that would require additional
school facilities. Given its lakeside location, proximity to downtown Dallas,
and the scarcity of developable land in the area, this property is expected to
be developed with high-end residences, which would add to the district's already
wealthy tax base.
TAX BASE DIVERSITY
The sizable commercial presence in the district's tax base results in a high
$191,000 market value per capita. After some modest dips in fiscal years 2010
through 2012, the district's diverse tax base resumed growth in fiscal 2013.
Although the tax base has matured, the prospects for continued TAV growth over
time continue to be strong given the ongoing commercial development along its
LOCATION IN BROAD AND DIVERSE DFW ECONOMY
The district's proximity to Dallas and location in the broader DFW metropolitan
area provides residents with easy access to a large and diverse labor market.
Dallas is the second largest city in the state and ninth largest in the nation,
with an estimated population of 1.2 million. The city is home to numerous
corporate headquarters, and prominent economic sectors include transportation,
financial services, wholesale trade, manufacturing, oil/gas, and education and
The area employment picture is positive, with the city of Coppell and the
surrounding DFW region adding jobs at a rate faster than the nation since the
recession ended in 2009. Coppell's unemployment rate, at 5.2% in December 2012,
compares favorably to the DFW region (5.9%), state (6.0%), and the national
average (7.6%). Local wealth levels are high with median household income at
almost twice that of the DFW metro area and more than double that of the state
and national levels.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
In addition to the sources of information identified in the Tax-Supported Rating
Criteria, this action was additionally informed by information from Creditscope,
University Financial Associates, and LoanPerformance, Inc.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 14 2012.
--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 14, 2012.
Applicable Criteria and Related Research
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria