DALLAS - Standard & Poor's downgraded the underlying rating of Venus Independent School District in Texas to A from A-plus, citing a declining tax base amid a downturn in the oil and gas industry.
"The negative tax base trend and draws on reserves, in addition to the lack of formalized financial policies, in several key areas, are credit concerns and support the downward rating action," lead analyst Emmanuelle Lawrence wrote.
With an enrollment of about 11,755, Venus ISD is approximately 30 miles southwest of Dallas in Johnson County.
In fiscal year 2010, the 10 leading taxpayers -- four of which were oil- and gas-related companies -- accounted for 43% of assessed value in the district.
From fiscal years 2010 to 2014, the district experienced significant, annual declines in assessed valuation, which management attributed to a dip in petrochemical production, analysts said.
The tax base declined at an annual average rate of 13% from fiscal 2010 to $246.8 million in fiscal 2014.
"Market value, an indicator of wealth, is low in our view, at $20,492 per capita down from $45,613 in 2010," Lawrence wrote. "Officials expect the district's tax base to rebound in the coming years, as the dip in the petrochemical production has begun to stabilize and also due to the construction of about 150 homes that will begin this year."
The district is also facing a lawsuit filed in April 2014 by Godley, Grandview, Keene and Rio Vista ISDs seeking between $300,000 and $400,000.
The amount is what the Venus ISD owes to the Johnson County Shared Services Arrangement when it withdrew from the program in July 2012 after being a member for more than 25 years, according to S&P.
"The court proceedings have not started yet," Lawrence wrote. "However, the district has set-up a liability account to pay any settlement cost for this lawsuit. Therefore, this will not affect the district's general fund balance."
On the positive side, Venus ISD's general fund reserve position is still very strong, in S&P's view. The district reported a deficit of about $2.1 million at fiscal year-end 2013 due to one-time capital needs. For fiscal 2013, the available fund balance was $3.4 million or a very strong 20.6% of expenditures.
"The magnitude of the deficit reduced to about $144,000 in fiscal 2014 mainly due to increased state-aid receipts by about 16%, decreased property tax collections by about 9% and reduction in the capital outlay expenditures by about 84%," Lawrence wrote.
