Fitch Rates College Station ISD, Texas' $5MM GO Rfdg Bonds 'AA'; Outlook Stable

AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA' rating to College Station Independent School District (the district), Texas' $5.3 million unlimited tax refunding bonds, series 2009. In addition, Fitch affirms the 'AA' rating on the district's approximately $141 million in outstanding unlimited tax bonds. The Rating Outlook is Stable.

Scheduled for a negotiated sale as early as Oct. 22, 2009 the bonds are direct obligations of the district, payable from an unlimited property tax levy on all taxable property located within the district. Bond proceeds will be used to refund a portion of the district's outstanding debt and to pay issuance costs.

The 'AA' rating reflects the district's strong financial position, moderate debt levels with above-average debt amortization, and a somewhat limited although stable local economy that continues to demonstrate solid tax base growth. While area wealth levels are below average, they are affected by the large student population and somewhat mitigated by a lower cost of living in the region. Substantial reserve levels and healthy yet manageable enrollment growth have allowed for financial flexibility in the district's operations. Notably, unlike most Texas school districts, College Station ISD maintains some financial flexibility with a discretionary maintenance and operating (M&O) taxing margin that does not require voter approval. Under the existing school finance system the district is considered property rich, subject to wealth equalization under state legislative definition. The district's ability to manage expenditures and maintain solid reserves to offset operating financial pressures associated with opening new facilities over the near term will be integral to maintaining credit quality.

Located in Brazos County, approximately 90 miles equidistant from Houston and Austin, College Station ISD encompasses 103 square miles and approximately 91,000 individuals. The district serves the city of College Station, which is part of the larger College Station-Bryan metro area that serves as a regional hub for the predominately rural surrounding area. With its roughly 55,000 students, the large, flagship campus of the Texas A&M University System in College Station drives much of the local economy. Government, health care, and education are some of the area's largest non-agricultural employment sectors that historically provide stability to the local economy. Unemployment levels in the area are typically below those of the state and nation, and although rising in recent months, the metro area's August 2009 unemployment rate continued that trend at 6.4%. At $5.9 billion in fiscal 2010, tax base growth remains healthy, averaging annual gains of not quite 11% since fiscal 2005. Tax base gains have outpaced healthy enrollment increases of not quite 4% on average annually, resulting in a total of almost 9,600 students district-wide by the end of fiscal 2009.

The district's financial position is a credit positive. Despite growth pressures, conservative financial management has generated substantial operating surpluses annually since fiscal 2004, and the district's very solid reserve levels have trended upward. The district continued to maintain strong reserve levels in fiscal 2008, reporting an unreserved general fund balance of slightly more than $34 million or 49% of spending. Liquidity also remained substantial at almost $36 million or roughly six months of cash on hand. District officials currently anticipate slightly better than budgeted results for fiscal 2009 with a modest operating deficit of about $1.1 million. Another modest operating deficit of $2.2 million is currently projected in the preliminary fiscal 2010 budget, primarily due to the additional operating costs associated with opening a new school. The district has no immediate plans to approach voters for additional M&O tax rate increases.

Fitch considers the district's debt level moderate and capital needs fairly manageable. Overall debt ratios approximate $3,400 on a per capita basis, but rise to moderately high levels at about 5.2% of taxable assessed valuation (TAV) on an overall basis. Principal amortization is above average. The current offering will be used to refund certain outstanding obligations and generate a present value savings for the district. District voters approved a $144.2 million bond authorization in May 2009, the majority of which was for the district's second comprehensive high school. Approved by a historically large margin, the authorization is currently projected to last the district for the next five to six years.

For additional information on the district, please review the full rating report dated Aug. 14, 2009.

Additional information is available at www.fitchratings.com.

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Fitch Ratings
Rebecca Moses, 512-215-3739 (Austin)
Jose Acosta, 512-215-3726 (Austin)
Cindy Stoller, 212-908-0526 (Media Relations, New York)
cindy.stoller@fitchratings.com