Fitch Affirms Long Beach USD, California 'AA-' GO Bonds; Stable Outlook
By: Financial News
Fitch Ratings affirms the 'AA-' rating to $252 million Long Beach Unified School District (Long Angeles County, California) outstanding general obligation (GO) bonds. The Rating Outlook is revised to Stable from Negative.
The 'AA-' rating reflects Long Beach Unified School District's (the district) favorable financial position, low debt levels with manageable capital needs, and growth in tax base and economy. These strengths are somewhat offset by a recent decline in student attendance levels. The revision in Rating Outlook to Stable from Negative reflects management's successful implementation of a strategic plan to balance operations and restore reserves to a more appropriate level constant with a high grade rating.
The district is large, covering 129 square miles of southern Los Angeles County and encompassing an estimated population of nearly 600,000. The district is California's third largest, with approximately 90,000 students. Student attendance levels decreased by 3% in 2006 due to local demographic shifts, reportedly, a result of escalating home prices in the area. The district projects a further 2.5% decline in 2007 with enrollment levels stabilizing soon thereafter. The district's area includes the cities of Long Beach and Signal Hill, Santa Catalina Island, portions of Lakewood, and unincorporated areas of the county. Assessed values continue their strong growth since 2000, rising by approximately 9% in fiscal 2005. Current commercial and residential development indicates further gains over the near term. Income levels for Long Beach are slightly below state and national averages.
The district's financial position is favorable, improving markedly from prior years. The fiscal 2005 general fund balance totals $43 million or 6.2% of expenditures and transfers out, representing a sizeable 31% increase from fiscal 2004 fund balance levels. Improvement in reserve levels is a result of large increases in revenue limit source funding particularly from state sources in addition to a reduction in labor costs as part of the district's strategic plan to eliminate a structural deficit. Unaudited results for fiscal 2006 indicate a fund balance increase to $65.9 million or healthy 9.2% of spending.
The district's debt levels are low, mitigated by healthy assessed valuation gains, despite frequent issuances in recent years. Direct debt totals a low $559 per capita or 0.87% of market value, while overall debt totals $1,190 per capita or 1.9% of market value. The district expects to issue the remaining $30 million from its election of 1999 GO authorization in 2007.
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