The Crystal City Independent School District in South Texas saw its underlying rating downgraded by Fitch Ratings to BBB-plus from A-minus, but the action may not have much impact. With its $23.6 million of general obligation bonds guaranteed by the Texas Permanent School Fund, the debt also has a triple-A enhanced rating.

The PSF, which has been sidelined this year by capacity limits, will be available to Texas school districts in 2010, now that the Internal Revenue Service has agreed to double the capacity of the fund to back debt.

Fitch analysts said the downgrade reflects Crystal City ISD’s continuing declines in student enrollment, a very high local unemployment rate, concern over management’s ability to reduce expenditures in the event of further revenue declines, and significant recent reductions in the district’s assessed value in an environment of limited financial flexibility.

Analysts assigned a stable outlook, citing the district’s reduced but still significant general fund reserves, and the revenue stability derived from the state, which provides most of the operating funds.

Fitch revised the rating in the process of routine surveillance rather than in advance of a bond issue. Analysts noted that the district’s current financial position had slightly weakened since the last review, although it was still adequate for the ­rating category.

“Total general fund reserves have fallen from $5.8 million (37% of annual spending) in fiscal 2005 to an unaudited $5.6 million (27%) in fiscal 2009,” they wrote.

With a chronically high unemployment rate, the jobless rate in Zavala County, which includes Crystal City, was 15.7% in October, compared to a 10% national rate.

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