|[February 26, 2014]
Fitch Affirms Mabank ISD, TX ULTs at 'AA'; Outlook Stable
AUSTIN, Texas --(Business Wire)--
Fitch Ratings has affirmed its 'AA' rating on the $49.5 million
outstanding unlimited tax bonds (ULTs) of Mabank Independent School
District (the district).
The Rating Outlook is Stable.
The outstanding ULTs are secured by an unlimited ad valorem tax levied
against all taxable property within the district. In addition, the bonds
are secured by the Texas PSF guarantee, whose bond guarantee program is
rated 'AAA' by Fitch.
KEY RATING DRIVERS
SOUND FISCAL PROFILE: The district's solid financial performance is
reflected in ample general fund balances. The tenured management team
typically outperforms its structurally balanced budget.
STABLE ECONOMY: The largely rural economy continues to transition into a
residential community, driving steady tax base growth. Mabank is a
popular recreational destination drawing weekend visitors from nearby
Dallas-Fort Worth that have spurred residential and commercial growth.
MODERATE DEBT: Overall debt levels are manageable, as the district
borrows infrequently. The amortization rate is well below average, but
infrastructure capacity is adequate and officials do not anticipate
issuing debt in the next several years.
SHIFT IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental
credit characteristics including the city's strong financial management
practices. The Stable Outlook reflects Fitch's expectation that such
shifts are unlikely.
Mabank ISD is located in an agricultural and oil producing area
approximately 50 miles southeast of Dallas serving a population of about
19,300, with boundaries that include portions of Kaufman, Henderson and
Van Zandt Counties.
The three principal communities in the district are Mabank, Gun Barrel
City and Seven Points. Nearby Cedar Creek Reservoir is a major tourism
attraction, and improved highway access to the area from Dallas over the
past decade has generated both residential and commercial development.
The Kaufman County unemployment rate improved to 5.6% as of November
2013 (from 6.2% in November 2012), similar to the 5.8% rate for Texas
and below the 6.6% national average rate for the same period. The
improvement reflects steady growth of the employment base over the past
Market value appreciated by a compound annual growth rate of about 4%
over the past seven years ending in fiscal 2014. The district attributes
much of the growth to the development surrounding Cedar Creek Reservoir,
the fourth largest lake in Texas. The reservoir is 18 miles long and
provides 320 miles of shoreline, most of which has been built out. The
short commute to Dallas benefits the community, with reported summer
weekend populations increasing 10-20 times that of year-round residents.
The district anticipates modest near term tax base growth as farmland
continues to be converted for residential property usage, especially in
northern Kaufman County.
The district's full value per capita is moderate at $80,000 for fiscal
2014; the tax base is without concentration. With a total tax rate of
$1.38 per $100 of taxable assessed valuation (TAV), including a
maintenance and operations (M&O) tax rate at the statutory cap of $1.04,
the tax burden is moderate. The districtdoes not have immediate plans
to seek an M&O tax rate increase.
STRONG FINANCIAL PERFORMANCE
Consistent financial results over the past five fiscal years reflect
prudent financial management. The district instituted cost savings to
mitigate fiscal 2012/2013 state funding cuts. These included position
reductions, a salary freeze during fiscal 2012, and supply and travel
budget reductions. A fiscal 2013 net operating surplus of $524,000
improved the unrestricted general fund balance to $6.4 million, a strong
26.8% of spending.
The district expects to end fiscal 2014 with like reserves.
Reinstatement of $1.4 million in fiscal 2014 state aid allows the
restoration of several positions cut during the last biennium. The
district is positioned to reap ongoing savings form utility and
transportation improvement funded in part with grant monies.
Overall debt is moderate at $2,656 per capita, or 3.8% of market value;
principal amortization is below average at 31% within 10 years. The
district's interest and sinking fund (I&S) tax rate of $.34 per $100 of
TAV is well below the $0.50 statutory cap for new debt issuance,
although the district does not plan to issue debt for the foreseeable
future given sufficiency of capacity remaining in current facilities.
Carrying costs for debt service, pensions and other-postemployment
benefits (OPEB) are low at 11.3% of fiscal year 2013 governmental
spending. The state's funding of school districts' payments to the Texas
Teachers Retirement System (TRS) keeps costs low. However, districts are
vulnerable to future funding changes by the state as evidenced by a
relatively modest 1.5% of salary contribution requirement effective
fiscal year 2015.
TEXAS SCHOOL DISTRICT LITIGATION
In February 2013, a district judge ruled that the state's school finance
system is unconstitutional. The ruling, which was in response to a
consolidation of six lawsuits representing 75% of Texas school children,
found the system 'inefficient, inequitable, and unsuitable and
arbitrarily funds districts at different levels...' The judge also cited
inadequate funding and districts' inability to exercise 'meaningful
discretion' in setting tax rates as constitutional flaws in the current
The judge agreed to reopen testimony after the Texas legislature
restored $4.5 billion in school funding in its 2013 session. The
increased funding levels apply to school district budgets in fiscal
years 2014 and 2015. The judge will determine if the additional funding
affected arguments made during the trial. It is anticipated that the
original ruling, if upheld, will ultimately be appealed to the state
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, 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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