Fitch Affirms Greenfield Union School District, Kern County, CA's GOs at 'A+'; Outlook Stable

SAN FRANCISCO-(Business Wire)-September 28, 2009 - In the course of routine surveillance, Fitch Ratings affirms the 'A+' rating of Greenfield Union School District, Kern County, California's (the district) $18.6 million of outstanding general obligation (GO) bonds. The Rating Outlook is Stable.

The 'A+' rating reflects the district's currently strong but challenged financial position, including prudent management actions and years of strong surpluses having built up a high unreserved general fund balance, tempered by a moderate budgeted drawdown, a volatile state funding environment, and recently slowing enrollment growth. Other considerations include the vulnerable local economy, evidenced by a weakening local housing market, a substantial drop in fiscal 2010 assessed valuation (AV) levels, rising unemployment that is nonetheless lower than state levels, and lagging income levels. The district's debt profile is solid, with low to moderate debt levels, average amortization, and limited capital needs. The local tax base is diverse, and AV has historically grown at brisk levels, however recent AV declines have been substantial.

The district, with a population of about 47,800, is located in southern Kern County, about 110 miles north of Los Angeles. It includes part of the city of Bakersfield (37% by acreage and 87% by AV) and some adjacent unincorporated county area. The district, like many areas in the San Joaquin Valley, has seen much of its agricultural land developed into residential uses, historically requiring the district to expand its facilities. However, the softening local economy and housing market has caused new developments to predominantly halt, which has weighed on enrollment, AV, and economic indicators, while beneficially reducing immediate needs for capital expansion. Unemployment jumped to 10.1% in July from 6.7% a year prior; however, unemployment is below state and county levels, at 12.1% and 14.4%, respectively. Per capita income levels are somewhat low at 80.1% and 85.8% of the state and nation, but have been growing at a faster clip. The local housing market has exhibited weakness and has very high exposure to subprime mortgages, however, negative amortization mortgage exposure is somewhat low compared to the state. Nevertheless, AV in fiscal 2010 dropped by a high 15%, due substantially to Proposition 8 AV reductions.

The district's financial position is currently strong, but faces headwinds given the uncertain condition of state funding, an expected drop-off of one-time federal funding in fiscal 2011, and slowing enrollment growth. Management prudently built up a large unreserved fund balance, estimated at $12 million (17.7% of expenditures and transfers out) at fiscal year end 2009, benefiting from a high net surplus of $4.5 million. Reserves are expected to be at least partially spent if state funding continues at soft levels and as one-time federal revenues cease. In addition to building up a budget shortfall reserve, management has prudently cut expenditures, saving $500,000 and $1.5 million in fiscal years 2009 and 2010, respectively. Additionally, early retirement incentive programs are being discussed, with potentially significant savings in fiscal 2011 and beyond. Nevertheless, if a continued weak revenue environment continues and management is unable to keep satisfactory reserve levels, negative rating action may be warranted.

Debt levels are low to moderate, with direct debt per capita at $389 (1% of AV). The overall net debt burden per capita rises to $1,183 (3.2%). Amortization is average.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Send this news item to a friend.

Print This Page