In addition, Fitch affirms the following ratings:
--Issuer Default Rating (IDR) at 'AA'.
The COPs are scheduled to sell the week of
The Rating Outlook is Stable.
The district's COPs are secured by lease payments made to the trustee and pursuant to a master lease purchase agreement. Lease payments are payable from legally available funds of the district, subject to annual appropriation by the
KEY RATING DRIVERS
The 'AA' IDR reflects the district's good revenue growth prospects, limited independent ability to raise revenues, solid expenditure flexibility, and an adequate reserve position. Carrying costs associated with pension, other post-employment benefits (OPEB), and debt service spending are moderate, as are long-term debt and pension liabilities. There are currently no near-term plans to issue additional debt. The 'AA-' rating on the COPs is one notch below the IDR, reflecting the slightly higher degree of optionality associated with lease payments subject to appropriation.
Economic Resource Base
The school district, which is coterminous with
Revenue Framework: 'a' factor assessment
District operations are funded through a combination of state aid and local property taxes. The district's 10-year general fund revenue growth rate (through fiscal 2014) exceeded national inflation, but was lower than GDP growth. Continued revenue growth is expected, given recent economic improvement, enrollment growth projections, and a modestly improved environment for state school funding. The district has very limited independent ability to raise revenues.
Expenditure Framework: 'aa' factor assessment
The district's natural pace of spending growth is expected to be close to or marginally above that of revenue. Enrollment growth and staffing costs are the main expenditure drivers. The district has good control over employee- related expenditures, with some constraints related to class size requirements and maintenance of adequate staff compensation levels. Carrying costs associated with debt service and retiree costs are moderate and are expected to remain so even with the current debt issuance.
Long-Term Liability Burden: 'aaa' factor assessment
The district's long-term liability is low at about 2.7% of personal income. This is largely related to district debt, which amortizes rapidly. The district participates in the adequately-funded
Operating Performance: 'aa' factor assessment
The district has historically maintained sound fund balance levels, with recent declines largely related to capital spending. Fitch believes that the district, supported by its solid expenditure flexibility and adequate reserves, would maintain a satisfactory safety margin in a moderate economic decline scenario.
Maintenance of Financial Flexibility: The rating is sensitive to material changes in the district's solid expenditure flexibility, moderate debt and overall long-term liabilities, and maintaining adequate reserve levels through a typical economic cycle.
The two largest county employers are the school district and the
Recent county employment performance has been positive. Unemployment rates have been declining (4.5% in
County wealth levels exceed state and national averages and county income indicators are close to or in excess of state and national figures. The district's tax base experienced a significant decline between fiscal 2009 and fiscal 2013, with taxable assessed value (TAV) falling almost 24%. TAV is now showing sustained improvement and annual growth has exceeded 5% in recent years.
The Florida Education Finance Program (FEFP) is the primary mechanism for funding the operating costs of
District general fund revenue growth over a ten year period (through fiscal 2014) was just above inflation, but just below GDP growth. Going forward, the natural pace of revenue growth is expected to continue on a positive trajectory given recent enrollment growth and projections for continued modest enrollment gains. Following a long trend of flat performance through 2014, enrollment grew by about 2% in 2015, with another 1.4% growth estimated for 2016. The district expects continued modest annual growth (averaging about 1%) for the near term, which seems reasonable given recent and ongoing economic expansion. In addition, state revenue performance has returned to steady growth, which should benefit FEFP funding levels absent education funding policy changes. The enacted state budget for fiscal 2017 includes a roughly 1% increase in the level of per pupil funding.
Due to the state funding mechanism,
Salaries and benefits make up the bulk of district general fund expenditures. On a combined basis, they accounted for about 80% of general fund spending in recent years.
The pace of spending growth is expected to match or marginally exceed revenue growth, reflecting enrollment-driven spending needs largely funded by related increases in state funding and increased local revenues driven by TAV growth.
Carrying costs related to debt service, pensions and OPEB benefits are modest at about 8.4% of governmental spending for fiscal 2015 affording the district spending flexibility. Factors limiting district spending flexibility include class size requirements that can dictate staffing levels and the need to maintain adequate salary and benefit levels. The district is currently meeting its minimum class size mandates. Wages and benefits are collectively bargained between the district and unions representing teachers and support staff. Under
Long-Term Liability Burden
The district's long-term liability burden, related to debt and the district's share of the net pension liability of the FRS, is modest at about 2.7% of personal income in fiscal 2015. It is made up largely of the district's outstanding debt, which amortizes rapidly (about 84% in 10 years). Fitch expects the long-term liabilities and carrying costs to remain moderate even with current additional debt issuance. No additional new money debt issuance is planned for the near term.
The three-year scenario revenue estimate generated by Fitch's analytical sensitivity tool (FAST) indicates that in an unaddressed scenario associated with a moderate economic downturn, revenue declines would lead to significant fiscal stress. However, Fitch expects the district to respond to a decline in revenues similarly as in the past, by taking actions to reduce spending and rebalance operations while maintaining an adequate level of fundamental financial flexibility. Fitch believes that the district, supported by its solid expenditure flexibility and good reserves, would maintain a satisfactory safety margin in a moderate economic decline scenario. Unaudited estimates for fiscal 2016 indicate a general fund operating surplus that would increase reserves.
The district weathered the most recent economic downturn well, drawing on reserves as needed, but also implementing spending controls and maintaining adequate ending balances. Faced with state aid reductions and tax base declines, the district incurred deficits in fiscal years 2012 and 2013, respectively. Fiscal 2014 was essentially balanced, even with significant capital spending and the general fund transferring
Fiscal 2015 ended with an unrestricted general fund balance of
Certificates of Participation
The district has historically paid COPs debt service with revenue from its capital outlay millage, although all legally available revenues are available for this purpose. Current legislation allows
The district has determined that 2016C debt service associated with two projects (
The district expects to use about 0.7 mills of the capital outlay millage for COPs MADS that is eligible to be paid from the capital outlay millage. This amount is well below the state cap.
The master lease structure on the district's COPs is strong, requiring an all-or-none appropriation. In the case of nonappropriation, the trustee is authorized to require the district to surrender use of all facilities under the master lease. The district currently operates about 63 schools, of which 20 schools and school additions are under the master lease. With regard to the 2016C issuance, school buses, equipment and a
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in the applicable criteria specified below, this action was informed by information from Lumesis and
Dodd-Frank Rating Information Disclosure Form
Source: Fitch Ratings