S&P Rts McFarland Unified Sch Dist,CA GO Bnds 'BBB-'

Business Wire, August 24, 1998

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 8/24/98--Standard & Poor's today assigned its triple-'B'-minus rating to McFarland Unified School District, Calif.'s G.O. refunding bonds dated Sept. 1, 1998 due June 1, 2018.

The bonds are scheduled to sell Aug. 27, 1998. The rating reflects: -0-

     --   An agriculturally based economy and low wealth indicators;

     --   A concentrated tax base, with the top three taxpayers
          (cogeneration plants) representing 40% of total tax base;
          and

     --   High overall debt burden;

-0-

Offsetting these factors is the state's support of school financing and good financial performance.

The district (population 8,500) is located in northern Kern County and serves the city of McFarland. The district provides K-12 education to 2,659 students at six sites. This issue will be used to refund the district's 1994 bonds that were used to construct the district's middle school.

The local economy of the area is comprised largely of agriculture, and the high unemployment rate of 12.53% in Kern County reflects the seasonal employment of the industry. Median household incomes of McFarland are low at 55% of the state average and 57% of the national average. There is high concentration in assessed valuation (AV) with the top 10 leading taxpayers comprising 53% of total AV. The top three taxpayers, which comprised 40% of property values, are cogeneration plants whose future is uncertain as the industry is going through deregulation. AV has been volatile over the years, totaling $611 million. Housing prices for new homes average $70,000.

Overall debt for the district is high at $2,402 per capita, or 3.3% of property value. The debt service schedule decreases, dropping significantly in 2005. The district is considering going back to voters to approve G.O. bonds to finance the middle school's cafeteria facility at a cost of $1 million.

The district has maintained strong financial performance, posting operating surpluses between fiscal years 1996 and 1997. Preliminary results for fiscal year 1998 is an operating surplus of $493,000, increasing the general unreserved fund balance to show $1.4 million, or 10.1% of expenditures. Budgeted for fiscal year 1999 is a break-even position. The district is required to maintain a 3% general fund balance by the state, although the district's board maintains a 5% general fund balance policy. The district generally passes on the state cost-of-living adjustment to employees.

The district has participated in the state's class size reduction program (with student-to-teacher ratios at 20:1) for grades K-3 and the district's overall student-to-teacher ratio is a low at 21:1. The district's enrollment has been flat, increasing only 5% in the last five years.

OUTLOOK: STABLE The outlook is based on the district's strong financial management and a debt structure that reflects decreasing debt service payments, Standard & Poor's said.--CreditWire

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