NEW YORK - Fitch Ratings said it downgraded to A-minus from A Edcouch-Elsa Independent School District, Texas' (the district) $49 general obligation (GO) bonds as part of its continuous surveillance efforts.
The rating outlook is stable.
The downgrade reflects the deterioration of the district's previously adequate financial profile, stemming in large part from poor financial management practices that subsequently led to state conservatorship. The evidenced ability of the state to assert managerial control as necessary provides the foundation for this rating.
Improved financial practices have been established by a new management team in collaboration with the state conservator, which assisted the district in fiscal 2009 in realizing its first operating surplus in four years and without further short-term borrowing for cash flow needs.
The district regained a positive, albeit very modest, general fund balance as of fiscal 2009, largely due to the receipt of one-time revenue. On an unaudited basis, management again anticipates adding modestly to the fund balance by the close of fiscal 2010.
The local economy and tax base are limited in scope, tax collections are very weak and area wealth levels are well below average.
Debt levels are modest, assisted by substantial state support for the district's debt. Management reports no immediate short- or long-term debt plans.
