|[October 08, 2013]
Fitch Affirms Canyon ISD (TX) ULT Bonds at 'AA'; Outlook Stable
AUSTIN, Texas --(Business Wire)--
Fitch Ratings affirms its 'AA' rating for the following Canyon
Independent School District, Texas' (ISD; the district) unlimited tax
--$2.5 million ULT refunding and improvement bonds, series 2002A;
--$48.2 million ULT refunding bonds, series 2007;
--$25.9 million ULT school building bonds, series 2007.
The Rating Outlook is Stable.
The bonds are secured by an unlimited ad valorem tax, levied against all
taxable property in the district and are further secured by the Texas
Permanent School Fund guaranty.
KEY RATING DRIVERS
SOLID FINANCIAL PROFILE: The district's financial profile remains strong
and is characterized by solid general fund reserve levels and sound
GROWING, DIVERSE TAX BASE: The district's diverse tax base continues to
expand, although at a slower pace.
MODERATE DEBT BURDEN: Debt levels are moderate and amortization is
below-average. Capital needs are expected to be manageable despite
recent acceleration of enrollment growth.
PARTICIPATION IN REGIONAL ECONOMY: Canyon ISD benefits from its
proximity to the larger Amarillo MSA employment base and economy. The
area's economy is stable and the city serves as the regional commercial
hub for the Texas panhandle.
SHIFT IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental
credit characteristics; future credit quality could depend on the
district's continued trend of its strong operating performance balanced
against the implementation of its ensuing capital improvement plans.
The district is located along the southern border of Amarillo in Randall
County, serving a 720-square mile area that is largely rural and
encompasses roughly 54,000 individuals. The city of Amarillo is a
regional hub that serves as the banking, distribution, and commercial
center for the Texas panhandle. The district's economic base is
benefiting from its proximity to Amarillo, and shifting away from its
rural, agricultural roots toward that of a suburban, bedroom community.
STRONG FINANCIAL PROFILE
The district's financial profile is characterized by its conservative
management, consistent positive operating results, and solid financial
reserves. The district posted net operating surpluses after transfers in
four of the last five fiscal years. A modest $1.2 million drawdown in
fiscal 2010 was attributed to a $4 million planned capital project for a
At the close of fiscal 2012, the district's unrestricted general fund
balance totaled a solid $27.6 million, or 52.1% of spending, more than
double the district's informal target of three months or 25% of
expenditures. The district has prudently planned to spend down some of
its excess fund balance for onetime capital outlays. The district
planned to draw down reserves by $3.3 million for capital projects in
fiscal 2013, but due to its conservative operating budget, the draw down
is now projected at only $1 million. The fiscal 2014 operating budget is
balanced. However, district management is working on a capital plan that
may result in a drawdown of reserves. Given the district's very high
reserves, history of conservative management practices and adherence to
its policies, Fitch believes the district will continue to maintain
MODERATE DEBT LEVELS WITH MANAGEABLE FACILITIES NEEDS
Debt levels are moderate at $2,459 per capita or 3.1% of market value.
Principal amortization is below average at a rate of 44% within 10
years. The fiscal 2014 debt service tax rate of $.19 per $100 of taxable
assessed valuation (TAV) has declined from the $0.25 levied in fiscal
2012 and is well below the statutory cap of $.50 per $100 of TAV for new
debt issuance. The district is in the process of forming a committee to
assess facility needs, prioritize, and make recommendations on size for
a possible bond election as early as May 2015. Given the manageable
growth needs and the relatively low debt service tax rate, Fitch
believes the debt burden will remain manageable upon implementation of a
long-term capital plan.
The district's pension liabilities are limited to its participation in
the state pension plan (TRS). The district's annual contribution to TRS
is determined by state law as is the contribution for the state-run
post-employment healthcare plan. District employees contribute to TRS
for pensions at 6.4% of annual compensation, and the state pays the
local district's contribution (6% in fiscal 2012), with the exception of
district contributions for probationary employees and for benefits on
employees' salaries that exceed the TRS statutory minimum. Including
debt service, fixed costs for long-term liabilities are manageable at
less than 13% of governmental fund spending in fiscal 2012. Since the
state provides for the majority of the district's contributions, the
carrying costs are projected to remain manageable.
GROWING ENROLLMENT AND TAX BASE
Growth trends in the district's enrollment and tax base have resulted
from the area's available land, which spurred predominately residential
development pushing south from Amarillo. While moderating slightly in
fiscal years 2010 and 2011, the tax base continued to grow, reaching
nearly $3.6 billion in fiscal 2014. Attendant commercial and retail
development has further expanded the tax base; taxpayer concentration is
minimal with the top 10 taxpayers comprising only 8% of current TAV.
District enrollment totals roughly 9,200 students and has grown at an
average annual pace of just over 2% over the past five years.
Amarillo area unemployment levels are typically below state and national
levels and although they rose, they remained below 6% during the
national recession. At 5.1% in July 2013, the unemployment rate remains
well below the state's 6.7% and the national 7.7% unemployment rates.
City wealth levels trail the state and national levels, but the county
median household income levels are 12% and 8% above that of the state
and U.S. levels, respectively.
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, Zillow, IHS (News - Alert) Global Insight, National
Association of Realtors, and the Texas Municipal Advisory Council.
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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