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This is a correction for a previous message. It updates the syndicate leader. Fitch Ratings assigns its 'AAA' rating to Socorro Independent School District (Socorro ISD, or the district), Texas' $73.7 million unlimited tax school building bonds, series 2006A, based on its guaranty from the Texas Permanent School Fund (PSF) whose financial strength is rated 'AAA' by Fitch. In addition, Fitch assigns an 'A+' underlying rating to the series 2006A bonds and affirms its underlying 'A+' rating on the district's $301.3 million outstanding unlimited tax bonds. The bonds are scheduled to be sold on a negotiated basis to a syndicate led by RBC Capital Markets on Aug. 28. The Rating Outlook is Stable. The bonds are direct obligations of the district and are payable from an ad valorem tax levied, without legal limitation as to rate or amount, on all taxable property within the district, as well as the PSF guaranty. Bond proceeds will be used to construct, renovate, acquire and equip school buildings, purchase sites, and to pay issuance costs. The 'A+' underlying rating reflects the district's consistent expansion of its financial reserves, rapid tax base growth, and moderate debt burden. With annual enrollment increases of about 1,800 or 7.5% over the last seven years, the district has developed an aggressive capital plan to increase instructional capacity while still maintaining well below-average tax rates for operations and maintenance (O&M). Offsetting risks include ongoing financial pressures associated with rapid enrollment growth as well as sizeable residential development related to the Fort Bliss expansion. Socorro ISD is located east of the city of El Paso in an arid ranching area that includes a portion of the Fort Bliss military installation and the Briggs Army Airfield. The district includes the city of Socorro, Horizon City, a portion of the city of El Paso, and unincorporated areas of El Paso County. Taxable assessed values (TAV) have grown by a strong compound annual average of over 12% since fiscal 2000, including a 16% increase in fiscal 2007 due to equal amounts of reappraisals and new construction. The district's top 10 taxpayers make up less than 5% of total values. Residential values make up 60% of total assessed values. Due to the ample amount of affordable land, about one-half of the homes built in El Paso are built on the east side within district boundaries. To mitigate the financial and capital needs of its high-growth environment, the district operates year-round. Troop additions to neighboring Fort Bliss could begin this spring and add to the district's enrollment base, although total growth is limited by the area's home-building capacity which averages about 1,300 new units per year. The district's history of employing innovative instructional delivery methods mitigates credit concern over the added operational pressures any infusion may cause. The current offering is the last installment from a $189 million authorization approved by voters in January 2004 for six new schools plus a new administration building, academic center, and a multi-purpose facility. Assuming no state support is granted, district voters were told to expect their debt service tax rate to nearly double to 37 cents per $100 TAV over a five-year period. However, with the recent award of an Instructional Facilities Allotment (IFA) for the series 2006 bonds, the projected peak tax rate was actually posted in fiscal 2006 at 27 cents, about 60% less than voters were promised. Substantial state support for about 70% of the district's debt service costs helps maintain the district's debt burden at a moderate level. Partly due to state requirements that districts structure state-supported debt with level debt service, principal amortization is below average at 35% in 10 years. The district's financial performance has been solid despite the high enrollment growth environment. To minimize operating and capital pressures, the district implemented year-round education and multi-track scheduling over a decade ago, although sufficient capacity has been developed, allowing the district to return to a single schedule at all its campuses in fiscal 2002. Despite these operating pressures, the district's unreserved general fund balances have increased annually since fiscal 1998, allowing it to exceed its two-month or 16% undesignated general fund balance policy starting in fiscal 2003. Fiscal 2005 ended with a $2.6 million operating surplus even after using $7 million for pay-as-you-go capital outlays that included the purchase of school sites and construction of an administration building. The fiscal 2006 budget was adopted as balanced but is now projected to add $2 million to reserves despite larger than usual 5% salary increases and the opening of two new schools. The Texas legislature recently passed property tax relief measures that were subsequently signed by the governor. The legislation provides for mandatory reductions in the local O&M property tax rate of 11% for fiscal 2007 and a cumulative 33% for fiscal 2008, based on the fiscal 2006 O&M tax rate. To offset the loss of local revenue, the state will increase its share of funding to local school districts, including the district, so that the measures are expected to be revenue-neutral. The district's proposed fiscal 2007 budget is balanced and includes the optional four-cent levy for O&M, allowing the district to supplement the $2,000 in state-funded teacher pay raises with $1,000 in locally funded pay hikes, increasing the starting teacher salary to a competitive $40,100 per year. 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Article Source: http://www.new.citynewslive.com
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