|[September 19, 2013]
Fitch Affirms Adams County School District No. 50, Colorado's GOs at 'AA+'; Outlook Stable
NEW YORK --(Business Wire)--
Fitch Ratings has taken the following action on Adams County School
District No. 50, Colorado:
--$19.5 million outstanding general obligation (GO) bonds, series 2006,
affirmed at 'AA+'.
The Rating Outlook is Stable.
The bonds are general obligations of the district secured by the levy of
an unlimited ad valorem tax on all taxable property within the district.
KEY RATING DRIVERS
SOLID FINANCIAL POSITION: The district's strong financial position has
been maintained for an extended period despite declining levels of state
aid, its largest revenue source.
SOUND FINANCIAL MANAGEMENT ALTHOUGH PRESSURES REMAIN: The district
benefits from a strong financial management team that practices
conservative budgeting. However, projected structural imbalance and
uncertainties regarding state funding and other revenue enhancement
measures are a concern.
MIXED ECONOMIC INDICATORS: High taxpayer concentration and below average
wealth levels are partially offset by the district's proximity to the
diverse Denver area economy and recovery in the district's tax base.
MANAGEABLE LONG-TERM OBLIGATIONS: Key debt ratios are considered
moderate by Fitch and should remain so based on the district's limited
future capital needs and borrowing plans. Post-employment obligations
MAINTAIN STRUCTURAL BALANCE: Fitch is concerned about the district's
planned general fund drawdown in fiscal 2014 and ongoing projected
structural imbalance thereafter. The district's ability to maintain
structural balance in the face of these fiscal challenges, either
through increased state funding, a possible mill levy override, or
spending cuts, is a key credit factor. Failure to maintain financial
balance and keep general fund reserves at historically high levels would
lead to a downgrade.
The district incorporates a 17 square mile area within Adams County
centrally located between Denver and Boulder. It includes part of the
city of Westminster located about 20 miles from downtown Denver as well
as portions of the cities of Arvada and Federal Heights. The district
serves a population of about 72,000.
In addition to carrying the district's GO pledge, on which Fitch's 'AA+'
rating is based, the bonds carry enhancement from the Colorado School
Credit Enhancement Program. Fitch's rating on the enhancement program,
at 'AA', is below Fitch's 'AA+' GO rating for the district and is thus
not considered in the GO rating assigned by Fitch.
MIXED ECONOMY BENEFITS FROM PROXIMITY TO DENVER
The district's economy, largely residential in nature, is supported by
its proximity to the Denver area employment centers. The district's
mature population has declined by 3% since 2000; however, several
recently completed multi-family housing projects and a commuter line,
which is in the preliminary stages of construction, are expected to spur
an influx of younger residents.
Enrolment totaled 10,039 in 2013, a decrease of about 0.8% from the
prior year. The district expects flat to modest increases in student
counts over the near term. The district recently opened a STEM school
(science, technology, engineering and math) in August 2013 which
enrolled 200 students from outside the district.
Taxable assessed value (TAV) is recovering. After decreasing by a
marginal 1.2% in fiscal 2012, values have stabilized, reflected by 3%
growth in fiscal 2013 and 2% growth (based on preliminary numbers) in
fiscal 2014. The district's tax base is highly concentrated, with Qwest (News - Alert)
Corporation, the largest taxpayer, comprising 9% of TAV. Other major
taxpayers include telecommunications, aerospace and utilities.
Walth indicators for the district are below average, with median
household income 83% and 91% of state and national levels, respectively;
however, the city of Westminster wealth levels are above state and
national averages. Area unemployment rates are historically lower than
the state and nation, reflecting some inherent stability within the
local economic base, which includes the Children's Hospital and the
University of Colorado Hospital as two of the district's largest
Financial operations are conservatively managed as demonstrated by
sizeable and growing reserve balances and strong levels of liquidity.
Financial operations are bolstered by voter-approved override millages
which annually add $7.8 million or approximately 10% to the district's
Fiscal 2012 ended with an unrestricted general fund balance of $16.1
million, equal to an ample 21% of spending. Management has been adept at
controlling general fund spending reflected by growth of less than 2% in
fiscal 2012 compared to the prior year.
After budgeting for the use of over $5.2 million of reserves in the
general fund (or 7% of spending) in fiscal 2013, the district estimates
using a much lower $1.5 million, to conclude the fiscal year with a
general fund unrestricted balance of $14.6 million, still equal to a
sizeable 18% of spending. The use of reserves in fiscal 2013 is
primarily related to wage and benefit increases in order to maintain
FISCAL 2014 INDICATES STRUCTURAL IMBALANCE; MILL OVERRIDE ON (News - Alert) BALLOT
The fiscal 2014 budget calls for the use of roughly $6 million in
reserves, but similar to the prior year, management expects the actual
drawdown to be less. The fiscal 2014 imbalance appears to stem from
declining state aid and increases in wages and benefits. The district is
planning to ask voters to approve a $5.25 million mill levy override on
the Nov. 5, 2013 ballot. If passed, management indicates the additional
revenue will be sufficient to balance the fiscal 2014 budget and restore
balance to financial operations going forward.
Absent revenue enhancement measures, the district would need to cut
expenditures. Fitch believes the district retains a fair amount of
expenditure flexibility allowing it to reduce spending further, if
MANAGEABLE DEBT PROFILE
The district's overall debt burden is low on a per capita basis ($1,386)
and midrange on a market value basis (2.3%). Fiscal 2012 debt service
constitutes a manageable 9.3% of spending, and amortization is
above-average with 66% retiring within 10 years. Capital needs are
minimal, and the district has no plans to issue debt in the near future.
The district provides pension and other post-employment benefit (OPEB)
benefits to its employees through its participation in the School
Division Trust Fund (SDTF), administered by the Public Employees
Retirement Association of Colorado (PERA). In fiscal 2012, the
district's combined contributions to PERA's pension and OPEB funds of
$7.7 million equaled a moderate 10% of general fund spending; the
district's contributions are below the actuarially calculated level. As
of Dec. 31, 2012, the SDTF plan funded ratio was a low 62.1%, or 56%
based on a Fitch estimated 7% rate of return. The district is expecting
modest increases to pension contributions going forward through 2018 as
a result of recently enacted reform legislation. Carrying costs are
reasonable at about 16% of governmental fund spending (less capital) in
Additional information is available at 'www.fitchratings.com'.
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, and the National
Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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