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Fitch Rates Washington USD, California, GO Bonds 'A+'.

SAN FRANCISCO -- Fitch Ratings assigns an 'A+' rating to $7.5 million Washington Unified School District (Yolo County, CA) Election of 1999 general obligation bonds (GO), series B. In addition, Fitch affirms its 'A+' rating on approximately $60.2 million GO bonds outstanding. The Rating Outlook is Stable.

The bonds are expected to sell via negotiation led by Stone & Youngberg during the week of Feb. 19. The bonds are secured by the district's full faith and credit unlimited ad valorem tax pledge.

The 'A+' rating reflects Washington Unified School District's (the district) low direct debt level, strong population and assessed valuation growth, rising school enrollment, and historically healthy fund balances. These factors are somewhat offset by concerns related to ongoing operating and capital pressures associated with growth and slow debt amortization. The administration is in the process of implementing several measures aimed at achieving budget balance and generating increased management efficiencies, which Fitch views favorably.

Located in the fast-growing city of West Sacramento, the district covers a 23-square-mile area in eastern Yolo County along the west bank of the Sacramento River and opposite the city of Sacramento. With a population of 42,000, the district provides services to approximately 7,100 students enrolled in 13 public schools located at 11 sites. Historically, enrollment growth has been steady, growing 11% from 2001-2006. Current projections, which have been revised downward from prior year forecasts, are anticipated to reach approximately 7,500 students by 2011 as the city of West Sacramento continues to be built out. The district has recorded significant tax base growth, increasing 15% annually over the past six years. The local economy is essentially residential in character with a good mix of commercial and industrial businesses. The city's labor force and employment opportunities have consistently improved since a significant decline in 2000.

Financial operations are marked by healthy general fund reserves that have ranged between 7%-11% of expenditures, transfers out, and other uses over the past five years. The district incurred operating deficits in fiscals 2004 and 2006, however, and essentially break-even results in fiscal 2005. The district is currently projecting that it will reverse that trend in fiscal 2007 with net income of approximately $380,000. The district's management is implementing a number of initiatives designed to improve revenue collections, reduce expenses, and achieve budget balance.

This is the second and final installment in a $17.5 million bond measure approved by nearly 80% of district voters in November 1999 for school renovations and repairs. The election of 1999 GO bonds, series A (approximately $10 million) was issued as the first installment in May 2001. In November 2006, more than 62% of voters supported an advisory measure, Measure M, to reallocate unissued election of 1999 bond funds to finance the construction of a new high school in West Sacramento. Including the full authorization, the direct debt level is low at just under $1,700 per capita, or 1% of market value. However, as a result of the overlapping debt of local taxing entities, the overall debt level is above average at about $5,700 per capita, or 5% of market value. The average tax rate levied to repay the two election of 1999 GO bond issuances, including this issue, is expected to be $14 per $100,000 of assessed valuation, assuming a conservative 6% future annual assessed valuation growth rate. Payout is slow, with 33% of the district debt repaid in 10 years. Additional borrowing is likely, as the district's board approved, in July 2006, a $252 million capital improvement plan through fiscal 2016 which will require funding from a multiplicity of sources.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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Publication:Business Wire
Date:Feb 9, 2007
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