|[May 20, 2014]
Fitch Affirms RNR School Fin Auth CFD No. 92-1, CA's Special Tax Bonds at 'AA-'; Outlook Stable
SAN FRANCISCO --(Business Wire)--
Fitch Ratings has affirmed the following RNR School Financing Authority
(the authority) Community Facilities District (CFD) No. 92-1 special tax
--$44.5 million special tax bonds, series 2004A, 2006A, and 2010A at
--$21 million subordinate special tax refunding bonds, series 2012A at
The Rating Outlook is Stable.
The special tax bonds, series 2004A, 2006A, and 2010A are secured by a
senior lien on special tax revenues, net of administrative expenses. The
debt service reserve requirements are met through a combination of
surety bonds (series 2004A and 2006A) and a cash-funded reserve (series
The subordinate special tax refunding bonds, series 2012A are secured by
the net special tax revenues on a subordinate basis to the senior
special tax bonds. The debt service reserve requirement is met through a
KEY RATING DRIVERS
SATISFACTORY DEBT SERVICE COVERAGE: The ratings reflect sound debt
service coverage (DSC) on senior and subordinate bonds and satisfactory
performance under various stress scenarios. The rating further reflects
Fitch's expectation that management will generally keep future
subordinate issuance in line with new revenue generating development
(the senior lien is closed) and not leverage revenues to the 1.10x
additional bonds test (ABT).
TESTED, STABLE REVENUE SOURCE: The special tax is assessed at a fixed
dollar amount per parcel and therefore does not fluctuate with changing
valuations on existing properties within the CFD. Special tax
delinquencies peaked at 4.7% during the recession but have since dropped
and delinquent properties are subject to accelerated foreclosure
NON-CONCENTRATED TAX BASE: The tax base is largely residential and the
top 20 taxpayers comprise a low 1.6% of the fiscal 2014 special tax
levy. The total effective tax rate in the area is somewhat high but
remains affordable given its above-average socioeconomic characteristics.
REBOUNDING ECONOMY: The regional economy centers on agribusiness,
government, and petroleum-related industry. Both the economy and the
property market are displaying positive trends and the local
unemployment rate compares favorably to the state's.
The rating is primarily sensitive to material shifts in DSC. Risks to
DSC include future leverage, taxpayer delinquencies, and/or taxpayer
prepayments. The Stable Outlook reflects Fitch's expectation that such
shifts are unlikely.
The authority was formed in 1992 by three school districts located in
Kern County at the southern end of California's San Joaquin Valley. The
authority provides local funds for the acquisition and construction of
school sites and facilities. The participating school districts are
Rosedale Union School District, Norris School District, and Rio
Bravo-Greeley Union School District.
The CFD encompasses approximately 18 square miles in and around
north-western Bakersfield. The CFD benefits from its limited exposure to
operational risks since it serves primarily as a funding conduit for
school district capital projects whose scope can be adjusted for varying
economic, demographic, and financial conditions.
The bonds are secured by either a closed senior lien (series 2004A,
2006A, and 2010A) or a subordinate lien (series 2012A) on special taxes,
net of administrative expenses, imposed on properties according to the
CFD's voter-approved special tax rate and method formula. The annual
special tax escalates 2% annually with no sunset provisions. The special
taxes are collected with property taxes and have the same lien priority
as ad valorem property taxes. The authority has covenanted to pursue
accelerated foreclosure proceedings if individual parcels are delinquent
by $2,000 or more, or if special tax delinquencies exceed 5% of the
special taxes levied.
SATISFACTORY DEBT SERVICE COVERAGE
The CFD issued $8.4 million in subordinate special tax bonds, series
2014A (not rated by Fitch). Consequently, all-in DSC levels have lowered
slightly since Fitch's last review but remain satisfactory and continue
to withstand various Fitch stress tests. In fiscal 2015, Fitch estimates
that DSC, net of administrative fees and delinquency rates based on
recent averages, will provide coverage on senior bond debt service at
2.4x and combined senior and subordinate debt service at 1.3x. All-in
MADS coverage is roughly 1.2x.
Annual debt service in most years through fiscal 2036 ascends at roughly
the same rate as the annual 2% levy increase, thereby preserving
coverage levels without considering additional debt issuance. As a fixed
charge, revenues do not fluctuate with valuations on existing properties
but would expand if/when new property is added to the tax roll.
Principal payout on all bonds is slow at 36% in 10 years and features
ascending debt service. With remaining debt authorization of $271
million, Fitch notes the slow maturity schedule could constrain future
capital financing flexibility. However, the district is considering the
issuance of approximately $20 million in subordinate special tax revenue
bonds in fiscal 2017 for construction of a new elementary school to meet
growing student enrollment. The current rating level incorporates
Fitch's expectation that management will generally keep future issuance
in line with new development and not leverage revenues to the
subordinate bonds' 1.10x annual debt service ABT.
Net special tax revenues in excess of debt service are used by member
school districts to fund pay-go capital projects and additional
The regional economy centers on agribusiness, government, and
petroleum-related industries. Bakersfield's wealth levels are somewhat
below average when compared to the state's. The city's December 2013
unemployment rate of 7.4% compares favorably to the state's rate of 7.9%
but is somewhat higher than the nation's rate of 6.5%. The city's
relative resilience is likely due to the high rate of governmental jobs
in the area with Bakersfield serving as the county seat.
The total effective tax rate in the area, including the special tax
assessment, is somewhat elevated but remains affordable with the median
effective tax rate for a single-family home at approximately 1.62%. The
tax base is largely residential and non-concentrated with the top 20
taxpayers comprising only 1.6% of the fiscal 2014 special tax levy.
Special tax delinquencies were 1.05% in fiscal 2013 compared to a recent
high of 4.68% in fiscal 2008. New development within the CFD slowed
significantly during the recession. Development activity is now
rebounding with 440 development permits issued in the 12 months ending
February 28, 2014, up from 320 during the comparable period a year
prior. There is still considerable development potential with more than
10,000 acres of undeveloped property within the CFD.
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 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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