Release Date April 29
By: Business Wire
AUSTIN, Texas, Apr 29, 2009 (BUSINESS WIRE) -- Fitch Ratings assigns a rating of 'AAA' to Dallas County Community College District, Texas' (the district) $110 million general obligation (GO) bonds, series 2009. In addition, Fitch affirms the 'AAA' rating on the approximately $25 million in maintenance tax notes and $273 million in outstanding parity bonds. The Rating Outlook is Stable.
Scheduled for a negotiated sale the week of May 4, 2009, the bonds are secured by the proceeds of a limited ad valorem tax levied against all taxable property within the district. State statute limits a community college district's debt service tax rate to no more than $0.50 per $100 taxable assessed valuation (TAV).
The 'AAA' rating for the district is based on diversified revenue sources, a substantial population and tax base with steady growth, and a large, steady enrollment base which has recently experienced higher than average levels of growth, drawn primarily from a limited geographical area. Tuition and property tax rates are low (both of which are among the lowest of community colleges in the state) and provide added financial flexibility, which is important given the possibility of tax base declines over the near term given current economic conditions. The district continues to maintain good liquidity levels with positive operating performance, which is in part reflective of the strong planning processes in place for operations as well as capital needs. Even with this issuance, the district maintains a moderate debt position. Fitch believes the large capital program underway that includes five new community campuses and recently increased levels of enrollment may, however, apply some degree of pressure to the district's operating margins and reserves over the near term.
The district's ability to manage expenditures and maintain solid reserves consistent with this rating category is integral to maintaining credit quality.
Coterminous with the boundaries of Dallas County, the district encompasses 860 square miles and serves a population of almost 2.4 million. Dallas County is the eighth most populous county in the nation. County socioeconomic indicators point to above-average wealth levels. The district benefits from its central location within the broad and diverse Dallas-Fort Worth metropolitan economy. Insurance, banking, and finance are prominent sectors of the regional economy, as are health care, education, retail trade, tourism, electronics, and high-technology manufacturing. The region's geographic accessibility and extensive transportation network have led to the development of national and international product distribution facilities. Taxable values grew nearly 6% in fiscal 2009 over the prior year's level to a substantial $177.5 billion. Given the impact of current economic conditions, however, the district preliminarily expects a modest decline of almost 5% in TAV for fiscal 2010. Having trended downward since 2003, more recent county unemployment rates like much of the nation also reflect a softening in the local economy at 5.4% in 2008 and 7.3% in February 2009, which now modestly exceeds the metro and state averages.
The district was established in 1965. Today, the district has seven colleges located throughout Dallas County and it is the largest community college district in the state. The equivalent of 10% of the Dallas County adult population enrolls at the district each year. Enrollment has historically shown steady growth, although most recently, the district experienced a sharp 6% jump in fall 2008 semester headcount and 2009 enrollment numbers continue these higher levels of growth. District officials attribute much of this growth not only to the currently worsening economic conditions that typically drive enrollment increases, but the expanded use of the district by local students while in high school through dual enrollment programs. Like most community colleges, tuition rates and open enrollment policies are attractive in recruiting students. Tuition rates are relatively low when compared to public four-year universities in the state. The district is able to keep its tuition affordable since approximately 66% of its revenue is derived from property taxes and state appropriations.
General stability in the three major funding sources has contributed to the positive operating performance of the district. The three major funding sources for the district in fiscal 2008 are state appropriations (31% of total), local property tax receipts (34%), and student tuition (20%). Over the past five fiscal years, the district's operating margins have been positive, ranging from 3.4% to 7.1%. Break-even operations are typical for public colleges and universities. Reserves are minimally maintained at a recently strengthened level of four months of spending and management anticipates similar financial performance by the close of fiscal 2009. Positive financial performance is aided by the district's conservative and tenured fiscal management and the added multi-year financial forecasting recently implemented will assist with ongoing operational planning for the new campuses.
The current offering represents the third phase of borrowing of a $450 million authorization approved by over 70% of voters in May 2004. The bond program will address system-wide improvements as well as the creation of five educational centers located in underserved or rapidly growing areas. The tax effect of the entire authorization is expected to be minimal with a maximum annual debt service tax rate of $0.025 per $100 TAV, assuming modest annual tax base growth and 20-year maturity schedules. Direct debt ratios are extremely low, but overall ratios climb to more moderate levels at 5.2% of TAV due to the significant number of overlapping units and the inclusion of large borrowers including the City of Dallas and Dallas Independent School District (underlying unlimited tax bonds rated 'AA-' by Fitch). With this issuance, amortization remains slightly below average at about 47% of outstanding tax-supported debt retired in 10 years.
SOURCE: Fitch Ratings CONTACT: Fitch Ratings, Austin Rebecca C. Moses, 512-215-3739 Steve Murray, 512-215-3729 or Media Relations: Cindy Stoller, 212-908-0526, New York Email: firstname.lastname@example.org Copyright Business Wire 2009
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