NEW YORK - Fitch Ratings said it assigned its AA-minus rating to Comal Independent School District, Texas' approximately $55.85 million unlimited tax school building bonds, series 2009, and upgraded the district's approximately $488 million in outstanding unlimited tax bonds to AA-minus from A-plus. Scheduled to sell on Oct. 29 via negotiation, the bonds are direct obligations of the district, payable from and secured by an unlimited ad valorem tax levied against all taxable property within the district. The rating outlook is stable.
The upgrade to AA-minus reflects the district's ability to build and maintain solid general fund reserve levels despite the challenges of a growing enrollment base and implementation of a new state funding formula. The rating incorporates the district's conservative fiscal management, favorable and consistent operating trends, diverse and growing taxable assessed valuation (TAV), and high debt burden with slow amortization.
The district has benefited from TAV growth outpacing enrollment gains and now is considered a property wealthy district. Although the district's debt levels are high, TAV growth and the recent slowdown of enrollment growth somewhat offsets this credit concern.
Due to the district's close proximity to San Antonio, availability of land, and major highways crossing through its boundaries, the prospects for continued TAV growth are positive, but at a slower pace. Moreover, given its solid reserve levels and proven conservative fiscal stewardship, Fitch believes the district will maintain its favorable financial profile.
Conservative budgeting practices and financial management have enabled the district to build and maintain large financial reserves. Over the last five audited fiscal years, the district posted positive operating results ranging from $2.7 million to $16.7 million, increasing general fund reserves to a solid $52 million, or 46% of expenditures at the close of fiscal 2008.
This is a substantial increase from an already healthy $13 million, or 17% of spending reported in fiscal 2004. The district's goal is to maintain reserves equivalent to three to four months of spending. For fiscal 2009 the district anticipates adding about $1 million to fund balance reserves, and budgeted balanced operations for fiscal 2010.
Typical of fast growth school districts in Texas, direct and overall debt levels are high and principal amortization is slow. The current offering is the final installment of the $206 million bond package approved by 70% of district voters in May 2008. Proceeds will be used for renovations and additions to three existing middle schools and to pay issuance costs.
Previous plans to seek additional voter approval during fiscal 2011 will be delayed by an estimated two to three years given the recent deceleration of enrollment growth. The district presently has no remaining authorization.
Located approximately 20 miles north of San Antonio, the district serves a predominantly rural 585-square-mile area primarily in Comal County and extends to small portions of Kendall, Hays, Guadalupe, and Bexar counties.
Enrollment is approaching 16,600, up about 3.5% from fiscal 2009, but growing at a slower clip than the previous 6.5% annual growth rate over the prior five fiscal years. The district benefits from its proximity to San Antonio and Austin with roughly two-thirds of its working population commuting to these labor markets. Comal County's 6.3% unemployment rate for August 2009 compared favorably to the state and national rate. County wealth levels are higher than the state and national levels.
