S&P Rates Castro Valley Unified SD, CA GO Bonds A+

Business Wire, July 16, 1998

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/16/98-- Standard & Poor's today assigned its single-'A'-plus rating to Castro Valley Unified School District, Calif.'s G.O. bonds (Election of 1998) series 1998 dated Aug. 1, 1998 due Aug. 1, 2023. The bonds are scheduled to sell July 23, 1998.

The rating reflects:

-- A bedroom community with good access to the San Francisco, Silicon Valley, and San Ramon Valley employment bases;

-- Strong growth in assessed property valuations; -- A moderate debt burden; and -- Good financial performance. Castro Valley Unified School District (K-12 and one adult school) is located 25 miles southeast of San Francisco, in the southwest portion of Alameda County. Approximately 95 square miles in size, the district serves an unincorporated portion of Alameda County, bordered by the cities of San Leandro, Hayward, and Fremont. The district has generally been growing, as new homes have been completed, but overall population growth is expected to taper off as the district becomes built out by about 2005. School district enrollment has grown about 11% since 1994, but is also flattening with most current and projected growth confined to high school-age students. The district was the first in Alameda County to achieve class-size reduction requirements for grades one to three. The district recently completed its class-size reduction effort for kindergarten, maintains a ratio of 20:1 for all elementary grades, and is about 27:1 at the high school level.

The tax base is primarily residential, with single family or other residential properties accounting for 92% of assessed values (AV). AV has been growing at an average of 3.6% over the past five years for a total of $2.67 billion in 1998, or a strong $51,542 per capita. The district tax base is very diverse, with the leading 10 taxpayers constituting only 3.4% of total AV.

Debt is moderate at $1,070 per capital and 1.9% of market value. After this issuance, the district will have $30.55 million in remaining G.O. authorization which it expects to issue in four more installments, the last of which is scheduled for 2007. Assuming a 3%-4% annual growth rate in AV, the district anticipates servicing the entire G.O. program with a tax rate of $48 per 100,000 of AV. Most proceeds from the current bond issue will be dedicated to student growth additions and modernization efforts. In order to address anticipated capacity strains at the high school level, the district's capital plan indicates the need for 26 new classrooms. The district expects to fund 12 of the new classrooms with developers' fees ($3.82 per square foot of outside development), particularly in neighborhoods of new development. The other 14 new classrooms needed are in older neighborhoods and will require alternative funding sources such as bond proceeds, state funding, or the district's general fund.

Financial performance has been solid. Fiscal 1997 ended with a small operating surplus of $1.5 million, leaving the unreserved fund balance at $3.6 million, or 9.9% of expenditures. Preliminary results for fiscal 1998 indicate break-even financial performance and the fiscal 1999 budget is balanced without any significant use of reserves. The unreserved portion of the fund balance will be between 7.4% - 7.8% of expenditures. The district also maintains a special reserve, funded from general fund transfers amounting to $2.4 million that the district is setting aside for capacity needs. However, this amount could be used to provide additional operating flexibility if needed.

OUTLOOK: STABLE The outlook is based on the district's prudent financial management and its comprehensive and thorough approach to capital planning. In addition, the district's access to at least three large employment bases makes its above-average wealth measures resilient and its anticipated debt burden affordable, Standard & Poor's said. -- CreditWire

   CONTACT:  Gabriel Petek, San Francisco 415/765-5042
              Daniel Stone, San Francisco 415/765-5016
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