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Fitch Affirms Mountain View School District, CA GOs at 'AA-'; Outlook Revised to StableFitch Ratings has affirmed the following Mountain View School District, California (the district) ratings: --$0.3 million general obligation (GO) election of 1977 bonds, series 2001-3 at 'AA-'; --$5.9 million Mountain View School Facilities Improvement District No. 1, CA (News - Alert) (SFID) GO (election of 2001) bonds, series 2001A at 'AA-'; --$1.6 million SFID GO (election of 2001) bonds, series 2001B at 'AA-'. The Rating Outlook is revised to Stable from Negative. SECURITY The district's GO bonds are payable from an unlimited ad valorem property tax on all taxable property within the district. The SFID's GO bonds are payable from an unlimited ad valorem property tax on all taxable property within the SFID. KEY RATING DRIVERS STABILIZING FINANCIAL PROFILE: The Outlook revision to Stable from Negative reflects the district's stabilizing financial performance and modest additions to financial reserves resulting from the improved state revenue environment. IMPROVING ECONOMY, MODERATING TAXPAYER CONCENTRATION: The local economy is mostly industrial, anchored by the Los Angeles/Ontario International Airport (the airport), and showing signs of improved economic performance. Wealth and employment metrics are mixed but tax base performance remains strong with continued assessed value (AV) growth. MODERATE LONG-TERM LIABILITIES BURDEN: The current debt burden is moderate with average amortization. Debt and retiree benefits are affordable, though Fitch expects carrying costs to increase with growing payments to the state pension plans in which the district participates. RATING SENSITIVITIES FINANCIAL STABILITY: The Stable Outlook reflects Fitch's view that the district's financial profile has stabilized given the improved funding environment. Indications that financial operations depart from this expectation would have implications for the rating. CREDIT PROFILE The school district covers 13 square miles composed of the SFID (89% of district AV) and two community facilities districts in southwestern San Bernardino County, approximately 40 miles east of Los Angeles. The district serves an estimated 2014 population of 20,248, which has grown modestly over the last decade. Despite this population growth, the district's student enrollment has been declining. STABILIZING FINANCIAL PROFILE Improved state revenues yielded modest surpluses in fiscals 2014 and 2015 (the latter unaudited) following several years of declining financial reserves. The district cut spending and made incremental draws on fund balance to address recessionary revenue declines between fiscals 2010 and 2013. Fiscal 2014 marked the first addition to unrestricted fund balance since at least fiscal 2009, which increased modestly to $1.47 million, or an adequate 8.1% of general fund spending. Estimated actual results for fiscal 2015 indicate further enhancement of unrestricted reserves, rising to $2.5 million, or 9.8% of spending. The increases are largely due to the improved state revenue picture reflecting implementation of the local control funding formula (LCFF). Spending has risen to meet increased student service needs and class size reduction requirements under the new system, though revenue growth is projected to exceed these increases. The district projects unrestricted reserves to increase substantially to $4.1 million in fiscal 2016, or a solid 19% of budgeted general fund spending, due to the receipt of state reimbursements for past years' mandated expenditures. Projections for operating performance in future years are also favorable, with additional modest surpluses planned through fiscal 2018. Projections incorporate committed state revenue increases, contractual labor cost growth. Fitch considers these estimates to be reasonable, given recovering financial performance and favorable state aid receipts in recent years. IMPROVING ECONOMY, MODERATING TAXPAYER CONCENTRATION The area is mostly industrial with logistics companies benefiting from the proximity to the airport. The city of Ontario's (the city) unemployment rate has improved significantly to 6.5% in June 2015 from 8.2% one year prior, driven largely by employment growth of 3.4%. Unemployment has fallen in line with the state (6.5%) for the first time since at least 2010, but remains above the national average of 5.6%. AV of both the district and SFID have performed well with only two years of modest declins throughout the recession followed by three years of consistent modest-to-moderate growth. District and SFID AV now exceed their peak values in fiscal 2010 and continued positive momentum appears likely as Zillow indicates a strong recovery in home prices in the area since 2012. Taxpayer concentration continues to moderate with overall tax base growth and shifts in taxpayer mix. The district's principal property taxpayers constitute 16.6% of the district's AV, and 18.7% of SFID AV, down from the prior year at 18% and 20%, respectively. The largest taxpayer, UPS Worldwide Forwarding, represents 3.4% of district AV, followed by apartment buildings and other industrial establishments. Ontario Ranch (previously called the New Model Colony), a residential and commercial development in the city that had been delayed for years, completed the first phase of construction in December 2014. When all phases are completed, the development is expected to bring as many as 19,000 new households and 8,100 additional students to the district. The district has established a second SFID to secure funding for the construction for additional schools for students living in the new community, but student enrollment impact to date has been limited and the district has no immediate plans for new construction, as student enrollment stabilization is not projected until fiscal 2017. MODERATE LONG-TERM LIABILITIES BURDEN The district's overall debt burden is moderate at $4,500 per capita and 2.1% of AV. Amortization of direct debt is average, with 56% of principal scheduled to be repaid within 10 years. New debt is unlikely in the immediate future, given lack of student enrollment pressures and limited capital needs. The district's obligations to retirees, though manageable, are likely to pose an increasing burden due to participation in the California State Teachers' Retirement System (CalSTRS). The district also participates in the California Public Employees' Retirement System (CalPERS). Whereas contribution rates for CalPERS are actuarially based, those for CalSTRS are set by statute and were below the level required to amortize the system's unfunded liability for some time. CalSTRS reported a funded ratio of 76.5% for fiscal 2014. Fitch estimates that funded ratio to be 72.5% based on a more conservative 7% rate of return assumption. School districts' CalSTRS contribution rates will rise significantly over the coming years to the actuarially required level. The district manages an other post-employment benefits (OPEB) plan to which it contributed a modest $241,000 or 0.5% of governmental fund spending in fiscal 2014. Total carrying costs, including debt service payments, annually required pension contributions, and pay-as-you-go OPEB funding are currently low, equaling 11.5% of total governmental fund spending in fiscal 2014. Additional information is available at 'www.fitchratings.com'. Fitch recently published an exposure draft of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated Sept. 10, 2015). The draft includes a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to fewer than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published by Jan. 20, 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. Fitch anticipates the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date. Applicable Criteria
Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)
Tax-Supported Rating Criteria (pub. 14 Aug 2012)
U.S. Local Government Tax-Supported Rating Criteria (pub. 14 Aug 2012) Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE '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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. View source version on businesswire.com: http://www.businesswire.com/news/home/20150930006894/en/ |
