Fitch Ratings assigns an 'A-' rating to $100 million West Contra Costa Unified School District (Contra Costa County, California) general obligation (GO) capital appreciation bonds, Election of 2002, series D. In addition, Fitch affirms the 'A-' rating on $375.1 million of GO bonds outstanding. The Rating Outlook is Stable. The bonds will sell competitively on Oct. 5, with A. Lopez & Associates, LLC, serving as the financial adviser.
The 'A-' rating reflects West Contra Costa Unified School District's (the district) positive financial results, prudent management, and strong assessed value growth. These strengths are somewhat offset by continued uncertainties surrounding future state appropriations, extensive capital needs that could potentially pressure district resources and increase debt levels, and a high concentration in the taxpayer base.
The district is located in western Contra Costa County, encompassing five cities (El Cerrito, Pinole, Richmond, San Pablo, and Hercules) and two unincorporated communities (El Sobrante and Kensington). The district also includes several petroleum and related companies led by Chevron Corp., the district's top taxpayer at 12.6% of assessed valuation. Overall property valuation has shown solid increases in recent years, with the 2005 assessed value rising by a strong 13.0%.
Budget reductions, coupled with the passage of a parcel tax, have stabilized the district's financial operations. Finances remain narrowly balanced, and historically were strained as a result of declining enrollment and reductions in state education funding. The parcel tax generated $9 million in local revenues in fiscal 2005; concurrent with this, close to $8.5 million in budget reductions were implemented. As a result, the 2005 ending general fund balance is estimated at $26.6 million, up from $18.7 million in the prior year. This amount represents a good 10.4% of spending. Budget data for fiscal 2006 achieve balance by undertaking $2 million in budget reductions, mainly through staff attrition and decreased expenditure on travel and supplies. While Fitch is concerned by the sunset of the parcel tax (last collection year is fiscal 2009), this concern is mitigated by the district's commitment to reduce expenditures by eliminating programs and positions should voters fail to renew the parcel tax.
These bonds are the fourth and final series of a 2002 $300 million voter-approved authorization under Proposition 39. Bond proceeds will be used primarily for school construction and modernization, which are part of a larger $543 million capital plan, including state matching funds. Direct debt is moderate at 2.6% of market value. Adding overlapping debt, the ratio rises to a high 4.3%. Debt amortization is slow. The district has a $400 million bond measure on the Nov. 8, 2005 ballot, to continue financing its school capital project needs.
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Thursday, July 29 2010 
