|[July 16, 2014]
Fitch Rates Coppell ISD TX ULT Bonds 'AAA' TX PSF; 'AA+' Underlying
AUSTIN, Texas --(Business Wire)--
Fitch Ratings assigns an 'AAA' rating to Coppell Independent School
District, Texas' (the district) unlimited tax (ULT) bonds as follows:
--$52.3 million ULT school building bonds, series 2014
The 'AAA' rating on the bonds is based on a guaranty provided by the
Texas Permanent School Fund (PSF), whose bond guaranty program is rated
'AAA' by Fitch. Fitch also assigns an underlying rating of 'AA+' to the
series 2014 bonds.
The bonds are scheduled for negotiated sale the week of July 21. Bond
proceeds will be used for facility improvements and to pay issuance
In addition, Fitch also affirms the following ratings:
--$174.8 million in outstanding ULT bonds at 'AA+'.
The Rating Outlook is Stable.
The bonds are direct obligations of the district and are secured by an
unlimited ad valorem tax pledge of the district. In addition, the bonds
are secured by the PSF guarantee.
KEY RATING DRIVERS
STRONG FINANCIAL FLEXIBILITY: Conservative fiscal management practices
have enabled the district to build healthy financial reserves.
DIVERSE AND GROWING TAV: Solid taxable assessed valuation (TAV) gains
reflect home price appreciation and the addition of new properties to
the district's diverse and wealthy tax base.
ELEVATED BUT MANAGEABLE DEBT: Overall debt is above average. Carrying
costs, including debt service, pension contributions and other
post-employment benefits (OPEB), place only a moderate burden on the
district's budget and reflect strong state support of pension
STRONG LOCAL ECONOMY: The district benefits from its location in the
broad and diverse economy of the Dallas-Fort Worth (DFW) metro area.
Residents have easy access to a large employment market that continues
to outperform the nation. Wealth levels are well above state and
STRONG FINANCIAL PROFILE: Maintenance of the district's strong financial
profile is a key credit mitigant to ongoing state funding uncertainties
and wealth transfer provisions.
The city of Coppell (the city) is located approximately 18 miles
northwest of downtown Dallas. The district serves the city and small
portions of the cities of Dallas and Irving in northwest Dallas County
with an estimated population of 48,187 in 2013. The district's
enrollment levels resumed growth in fiscal 2010, after a couple of years
of enrollment declines, to its current level of 11,364.
STRONG LOCAL ECONOMY IN GREATER DALLAS AREA
The district's location in the Dallas Fort Worth (DFW) metropolitan area
provides residents with easy access to a large and diverse labor market.
The city's unemployment rate as of April 2014 remains below state and
national averages at 4.5%, aided by four years of above-average
employment growth. Median household income is more than double that of
the U.S. average.
The district's tax base is diverse and without concentration. Fiscal
2014 market value per capita of $185,000 reflects appreciating home
values and a strong commercial and industrial base. Proximity to
interstate 35 and other major highways has attracted big-box
warehousing, most recently Amazon's 1 million square foot fulfillment
The district conservatively projects a 6% to 8% gain in fiscal 2015 TAV
based on very high preliminary values from the appraisal district. The
strong TAV growth reflects significant residential and commercial
development currently underway throughout the district, including within
the North Lake (Cypress Waters) development.
CONSERVATIVE FISCAL MANAGEMENT
The district is considered property wealthy and relies almost entirely
on local property taxes. Funding is subject to the stat formula and a
portion of the district's operations and maintenance (O&M) levy is
recaptured by the state for distribution to less wealthy school
districts. These payments totaled $18.4 million in fiscal 2013 (19.6% of
general fund spending).
Financial performance and reserve levels are very strong despite the
large recapture payments associated with the state funding formula. The
district posted a $2.5 million (2.6%) net surplus in fiscal 2013,
completing the year with $45.8 million in unrestricted general fund
reserves (48.7% of spending). Officials anticipate adding an additional
$2 million to reserves this fiscal year. The fiscal 2015 budget is
structurally balanced with property tax revenues absorbing the costs of
the district's new elementary school.
ELEVATED DEBT; ONGOING NEEDS
Fitch expects the district's overall debt, 4.8% of market value, to
remain elevated as the district is only about 70% built out. Ample
capacity remains under the state's statutory interest and sinking fund
(I&S) new issuance cap of $.50 per $100 of TAV. Officials project a peak
I&S tax rate of $.29 over the next several years.
Voters authorized a $79.5 million bond program in May 2013 for facility
construction, improvements, technology and vehicle needs. The first
issuance of $25.35 million funded improvements and construction of a
Net-Zero energy elementary school, also designed to be Leed (Leadership
in Energy and Environmental Design) certified. The school is scheduled
to open next month. Officials report that the Net-Zero elementary school
will produce as much energy as it uses.
This series 2014 issuance, the second from the May 2013 bond program,
will be used to construct and renovate the high school multi-purpose
competition gym/arena and athletic field house. Issuance of $7.2 million
in remaining authorization will focus on technology improvements. Beyond
that, officials report the potential for a bond election in three to
five years to address additional facility needs.
LIMITED PENSION; OPEB OBLIGATIONS
The district's pension liabilities are limited to its participation in
the state pension plan administered by the Teachers Retirement System of
Texas (TRS). The district's annual contribution to TRS is determined by
state law, as is the contribution for the state-run post-employment
benefit healthcare plan. Including debt service, pension and OPEB
contributions, carrying costs were a moderate 14.7% of fiscal 2013
governmental spending, benefitting from the state's strong support for
school district pension funding. However, districts are susceptible to
future funding changes by the state as evidenced by a relatively modest
1.5% of salary contribution requirement effective fiscal 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 the districts' inability to exercise
'meaningful discretion' in setting tax rates as constitutional flaws in
the current system.
The judge agreed to reopen testimony in January 2014 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 the
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates, and
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 14 2012.
--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 14,
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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