Fitch Affirms Jefferson Davis Parish School Dist. No. 1, LA GOs at 'BBB+'; Outlook Stable.

NEW YORK -- In the course of routine surveillance, Fitch Ratings has affirmed the 'BBB+' rating on School District No. 1 of Jefferson Davis Parish, Louisiana's (the district) approximately $2.7 million in general obligation school bonds. The Rating Outlook is Stable.

The bonds were authorized by the voters of the district and are payable from an unlimited ad valorem tax levied against all taxable property in the district. The Jefferson Davis Parish School Board (the board) is the governing authority of the district as well as six other school districts within the parish.

The 'BBB+' rating and Stable Rating Outlook reflects the board's historically positive financial results and healthy reserve levels, low debt burden and minimal future capital needs, and low unemployment despite the rural, agricultural-oriented local economy. The rating also considers the declining enrollment parish-wide, taxpayer concentration, and below-average wealth levels.

The board continues to maintain healthy reserve levels, closing fiscal 2008 with an unreserved and undesignated fund balance equal to $10.9 million or 23% of total spending. The board also has additional funds totaling $10.7 million that are unreserved but designated for various capital and operational expenditures, which increases the board's financial flexibility. The district anticipates closing fiscal 2009 with a $196,000 deficit due to one-time expenditures for instructional materials and technology upgrades. The 2010 budget reflects a $733,000 deficit for the general fund due to a projected 6% decline in sales tax revenues and increased expenditures in technology. Despite these deficits, the board should retain adequate financial levels.

The state minimum foundation program (MFP) is the primary revenue source comprising about 72% of general fund revenues in fiscal 2008. The board has benefited from regular, annual increases in state MFP payments, which have largely offset enrollment declines from 1994-2008 and enabled the board to maintain a sound financial profile. Parish-wide enrollment has slipped 1% annually since 2004 and was at 5,581 students in 2008. The drop in enrollment is due primarily to a lack of employment opportunities within the area. Officials believe enrollment will stabilize over the next several years noting recent economic activity within a local industrial park and other developments within the retail and tourism sector. Nevertheless, the board employs a staffing formula which aligns professional and support personnel with student headcount thereby controlling salary and benefit costs, the primary drivers of the general fund budget.

The district presently has only $2.7 million in outstanding debt, and as a result, direct debt ratios are very low at $774 per capita based on the 2005 population estimate of 3,500 for the district. Officials anticipate no additional capital needs over the near term. Principal repayment is slightly above average at 60% retired in 10 years.

The district encompasses an area of approximately 75 square miles at the center of Jefferson Davis Parish. The district includes the incorporated municipality of Lake Arthur, located roughly midway between Lake Charles and Lafayette and 10 miles south of Interstate Highway 10. The broader parish economy is rural and agriculturally oriented. Parish unemployment rates are favorable, equal to 7.0% as of July 2009 compared to 9.1% nationally. Wealth levels as measured by per capita personal income are very low, equal to 76% of the state average. Tax base growth has been strong in recent years fueled by an increase in oil and gas properties and reassessment in 2008. The district's tax base does have concentration amongst its largest taxpayers as well as within the cyclical oil and gas industry. The top 10 taxpayer list, which is dominated by oil and gas and pipeline firms, comprised roughly 48% of fiscal 2008 assessed valuation.

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