Fitch Rts $50.0MM Moreno Valley Unified School District, CA, GO Bonds 'A+'

Business Wire, May 12, 2004

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--May 12, 2004

Fitch Ratings assigns an 'A ' rating to $50.0 million Moreno Valley Unified School District general obligation bonds, 2004 election, series A (Riverside County, California). The Rating Outlook is Stable. The bonds are expected to sell via negotiation led by George K. Baum & Company on June 9th.

The 'A ' rating reflects the district's adequate financial operations and good fund balances, low to moderate debt levels, and strong annual assessed valuation (AV) growth. These factors are somewhat offset by growth-related capital pressures.

Located in western Riverside County, the district is home to 150,200 residents and encompasses a 43 square-mile area, including the city of Moreno Valley. The district sits along Highway 60, half-way between Los Angeles and Palm Springs. Student enrollment for the current fiscal year is 32,195. The area is primarily a bedroom community serving Riverside and the greater Los Angeles labor markets.

The Riverside County economy is diversified as evidenced by the flourishing industrial and commercial activities. City of Moreno Valley's unemployment rates are slightly higher than the county's, but are below the state and national rates. Median household income in 2000 was above the county and national medians, but just below California's. The district has experienced four years of strong AV growth, with assessed valuation growing at 10.1% in fiscal 2004. Taxpayer concentration is minimal.

Financial operations are adequate, marked by operating surpluses in two of the last three fiscal years. A $10.8 million operating surplus in fiscal 2003 brought the ending general fund balance to $24.9 million, or a healthy 12.0% of spending. This was achieved by close to $13.0 million in spending cuts instituted by the district's new management team. Fiscal 2003 cuts, along with a $4.0 million reduction in budgeted spending for the current fiscal year, have restored structural balance to the district's finances. The 2003 fund balance is a marked improvement over the previous two years, when fund balances were a satisfactory 6.5% and 5.6 % of spending, respectively.

This issuance was approved by an affirmative vote of 66.9% of the voters in March 2004, under California's Proposition 39 election procedure. Bond proceeds will be used for (a) repairs and improvements of existing schools ($20 million), and (b) construction of up to 10 new schools ($50 million). The district expects to receive up to $150 million in state hardship funding, to finance the construction of seven of these new schools. While preliminary, successful application for and receipt of state matching funds will go along way towards relieving growth-related capital spending and alleviating the need for additional debt issuance. Direct and overall debt levels are low to moderate at $568 per capita (1.4% of AV) and $1,445 (3.5% of AV), respectively. There are currently no plans to seek additional voter-approved debt.