|[March 15, 2012]
Fitch Rates Goose Creek CISD, TX Series 2012 ULT Rfdg Bonds 'AAA' PSF; Assigns 'AA' Underlying
AUSTIN, Texas --(Business Wire)--
Fitch Ratings assigns the following ratings to the Goose Creek
Consolidated Independent School District (CISD), Texas (the district)
unlimited tax (ULT) refunding bonds:
--$42.725 million ULT refunding bonds, series 2012 'AAA'.
The 'AAA' long-term rating reflects the guarantee provided by the Texas
Permanent School Fund (PSF), whose bond guarantee program is rated 'AAA'
Fitch also assigns an 'AA' underlying rating to the series 2012 bonds.
The bonds are expected to price via negotiation the week of March 19,
2012. Proceeds will be used to refund a portion of the district's
Fitch also assigns the underlying rating on $306.7 million of
outstanding district ULT bonds at 'AA'.
The Rating Outlook is Stable.
The bonds are secured by ad valorem taxes levied against all taxable
property within the district, without limitation as to rate or amount.
In addition, the bonds are secured by the Texas PSF guarantee.
KEY RATING DRIVERS
HIGHLY INDUSTRIAL ECONOMY: The district is home to the largest petroleum
refinery and among the largest petrochemical plants in the U.S.,
residing in the Houston-Sugar Land-Baytown metropolitan area with a
population of nearly 6 million. With port access and a rich multimodal
transportation network, the area also serves as a regional distribution
CONCENTRATED BUT LONGSTANDING TAX BASE: Fitch expects the district's tax
base concentration to remain substantially high due to expansions
underway by top taxpayers, but notes the essentiality of the
petrochemical processing and refinery business in the U.S. Additionally,
the presence of some diversity between upstream and downstream petroleum
usage within the district's tax base helps mitigate the impact of oil
STRONG FINANCES WITH ABUNDANT RESERVES: The district historically
outperforms the budget and maintains sizable general fund reserves of
more than 40% of spending, a key credit factor to help the district
manage potential revenue fluctuations associated with its concentrated
industrial tax base. In anticipation of school funding cuts, officials
achieved cost savings in fiscal 2011, which when combined with
enrollment growth, offset the state funding reductions. Management
expects fiscal year 2012 results to further supplement reserves and
projects a balanced fiscal 2013 budget.
MANAGEABLE DEBT BURDEN: The district's direct debt burden is modest.
Overall debt is above average, but is somewhat mitigated by a strong
local economy, expanding tax base, and adequate wealth levels. The
district does not receive state aid in support of debt service given its
wealthy industrial tax base. Additional planned borrowings are likely to
keep the overall debt levels elevated, but manageable.
HIGHLY INDUSTRIALIZED ECONOMY
Goose Creek CISD serves a population of almost 100,000, primarily in the
southeastern portion of Harris County, the 6th largest manufacturing
county in the U.S., and partially in Chambers County. Bordered by the
San Jacinto River on the west and the Houston Ship Channel to the south,
the area provides waterway access for industrial and recreational uses.
The district's enrollment has increased steadily over the past 10 years
to over 21,000 in fisca 2011. Officials conservatively project
enrollment gains of 1.5% to 2.0% over the next several years, which
Fitch considers reasonable based on recent trends. Population,
employment, income and average wage growth of the Houston-Sugar
Land-Baytown metro area has outstripped U.S. averages over the past
The district's tax base is represented by petrochemical, oil refinery,
distribution, electric utility and manufacturing concerns, led by
ExxonMobil (Issuer Default Rating of 'AAA' by Fitch), which comprised a
high 27% of the fiscal 2011 tax base. ExxonMobil's Baytown plant is the
largest petrochemical refinery in the U.S. While the concentration
represents a credit risk, Fitch notes the key role of oil refining and
petrochemical processing in the national economy. The balance of
upstream refining activity and downstream chemical and manufacturing
processing use of oil also helps to mitigate the impact of oil price
Fiscal 2012 taxable assessed valuation (TAV) of $8.5 billion is sizeable
and expected by management to grow over the next several years, which
Fitch considers reasonable based on reported estimates from the county
assessor's office projecting greater than 2% growth overall, led by 6%
growth in the industrial sector. Additionally, the top three taxpayers
have all announced plant expansions over the next several years, which
augurs well for the district's tax revenues, employment and local
SOUND FINANCIAL MANAGEMENT
The district completed fiscal 2011 with a $16.9 million operating
surplus net of transfers, bolstering its unrestricted general fund
balance (consisting of committed, assigned and unassigned funds) to a
sizeable $77 million (46% of spending). The fiscal 2011 net margin
benefited from approximately $8 million in Texas Education Association
(TEA) revenues which compensated the district for fiscal 2007 through
2010 underpayments, as well as $5.7 million in cost subsidies from
federal stabilization funds.
Management proactively reduced fiscal 2011 costs through attrition and
school consolidations, which combined with ongoing growth, mitigate the
state funding reductions totaling $10 million applicable to fiscal years
2012 and 2013. Officials expect to add $4 million to $5 million to
fiscal 2012 fund balance and report a balanced budget in fiscal 2013.
The district's conservative financial management is characterized by
results which typically exceed the budget and a policy targeting
unrestricted fund balance to 40% of spending. Fitch considers the
maintenance of sizeable fund balances a key to credit quality given the
highly concentrated tax base.
ABOVE-AVERAGE, BUT MANAGEABLE DEBT
The impact of direct debt service on the budget is manageable at 13.4%
of fiscal 2011 general fund expenditures. Overall debt is above average
as measured by debt per capita of $6,321, or 6.2% of market value.
Planned issuances of debt in the next several years are expected to keep
the district's debt level elevated, but manageable, considering ongoing
population and tax base growth.
The district provides pension and other post employment benefits (OPEB)
through the Texas Retirement Association (TRS), with annual required
contributions for fiscal 2011 of $1.6 million and $702,000,
respectively. The district also provides qualified employees with a
money purchase plan, contributing $4.1 million in fiscal 2011, funded
from the general fund and special revenue funds. The district's fixed
costs, including debt service, pension and OPEB comprised a manageable
16.2% of total general fund expenditures in fiscal 2011.
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 Fitch's
Tax-Supported Rating Criteria, this action was additionally informed by
information from CreditScope, University Financial Associates,
S&P/Case-Shiller Home Price Index, IHS (News - Alert) Global Insight, Zillow.com,
National Association of Realtors
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 15, 2011);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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