Two School Districts Get Multi-Notch Upgrades

DALLAS — Two Texas school districts garnered multi-notch upgrades from Standard & Poor’s due to strengthening reserves and stable economic bases in light of limited plans to issue debt in the near future.

Analysts raised the underlying rating of Huntsville Independent School District two notches A-plus from A-minus and bumped the credit of Pottsboro Independent School District up three notches to A-plus from BBB-plus.

The upgrade of the Huntsville ISD, which applies to $37.1 million of debt outstanding, reflects its steady assessed-valuation growth and stable employment base, as well as an “historically very strong” financial position, adequate wealth and income levels, and low debt.

Lois Anne New, the district’s business director, said she believes the district’s ability to maintain strong reserves led to the upgrade.

Standard & Poor’s said the district reported operating surpluses each of the past four years with reserves ranging from 22% of expenditures for fiscal 2004 to 41% in fiscal 2009 when the unreserved general fund balance stood at $17.1 million.

The district’s property-tax base has increased 37.6% since fiscal 2004 to $1.7 billion for fiscal 2010, according to analysts.

New said the district doesn’t have any authorized but unissued bonds nor any plans to put a bond package before voters for at least a few years. Aside from general upkeep of facilities, she said the district’s most-pressing need would be to expand its band hall at the high school to accommodate growth in that area.

The district, which is about 70 miles north of Houston, serves a total enrollment of about 6,000 students in eight schools.

Moody’s Investors Service rates the underlying credit of the district A3.

Analysts said the upgrade of the Pottsboro ISD, which is in North Texas near the Oklahoma border, reflects the district’s “limited, but stable, economy based on agriculture and petrochemical production, good income levels, steady assessed-value growth, and moderate overall debt.”

The higher rating applies to about $7.9 million of outstanding debt.

Officials managed to report surpluses in four of the past six fiscal years, however a $385,030 deficit for fiscal 2008 stemming from a decrease in federal aid brought the unreserved general-fund balance down to $3.3 million, according to analysts.

The district expects another draw down of $1.7 million in fiscal 2009 for the construction of an agricultural-science facility, but officials also imposed a hiring freeze to help control costs, Standard & Poor’s said.

The district’s assessed value has averaged annual growth of 5.9% the past five years to $581.5 million for fiscal 2009. Much of the growth is attributable to construction of second homes and retiree homes around Lake Texoma, along with increasing assessments on existing residential properties, according to analysts.

The district serves about 1,300 students at four schools.

Fitch rates Pottsboro ISD at A-minus while Moody’s doesn’t rate the district’s underlying credit.

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