Fitch Rts $12MM Brentwood Union School District, CA GO Bonds, 'A+'

Business Wire, Jan 21, 2004

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Jan. 21, 2004

Fitch Ratings assigns an 'A+' rating to Brentwood Union School District, Contra Costa County, California's $12 million general obligation bonds, election of 2003, series A. Fitch assigns an 'A+' rating to $28.3 million in outstanding general obligation bonds. The bonds are scheduled to price via competitive sale on Jan. 27. The Rating Outlook is Stable.

The 'A+' rating reflects the district's growing and diversifying economy, continued solid financial operations, and strong management team. The rating also reflects above-average overlapping debt and ongoing capital pressures, resulting from substantial enrollment increases.

The district is located in eastern Contra Costa County and encompasses 50 square miles. District boundaries include the city of Brentwood, as well as parts of Antioch and other unincorporated county land. Population growth has been rapid, increasing over 300% since 1990. Likewise, enrollment gains have been amongst the highest in the state, averaging 12% a year over the past five years. Projections indicate 8-10% near-term annual growth. Academic performance has been solid, with test scores consistently outpacing the California academic performance index (API).

The area economy has exhibited robust assessed value gains, averaging 26% per year since 2000. Further, building permit activity continues strong growth, both in residential and commercial permits. Above-average increases are attributed to affordable housing opportunities coupled with viable transportation options and proximity to numerous and diverse employment centers.

The district's financial position is sound, marked by healthy reserve levels as well as prudent and tenured management. Based on unaudited, actual results, the fiscal 2003 fund balance will increase $242,000 to a healthy $2.3 million or 6.8% of expenditures and transfers out. In addition, the district has other undesignated reserves totaling $2.2 million. The district's general fund reserve levels have averaged 9.8% over the past four fiscal years, well above the state's required 3% minimum. Senior management has been with the district for 14 years and has received various accolades for capital projects, financial planning and growth management. Labor relations are good, with district employees forgoing union representation and the district continuing to offer competitive salaries.

Direct debt levels within the district are moderate although overall debt ratios are high. Including this offering, direct debt represents $1,419 per capita, 1.25% of taxable value; following the full authorization, direct debt will increase slightly to 1.85% of taxable market value. Overall debt is high at $6,897 per capita, 6.10% of taxable value, characteristic of an area experiencing sustained growth. The district's $118 million capital plan is extensive; the plan extends through 2010 and utilizes various funding sources, including, developer fees, state matching funds, city funds, bond proceeds, and capital reserves.

This sale is the first issuance of a $35 million authorization approved by 72% of the voters in March 2003. The authorization will be used for school construction, modernization and renovation. Amortization is slightly below average, retiring only 15% of principal in ten years.