Fitch Ratings assigns the following rating to Princeton City School
District Board of Education, OH's (the district) general obligation (GO)
unlimited tax bonds:
--$105,240,000 (est.) GO refunding bonds, series 2014 'AA+'.
The bonds are expected to sell via negotiated sale the week of July 28,
2014. Proceeds from the sale of the bonds will be used to current refund
the district's series 2010C (federally taxable-Build America Bonds).
The Rating Outlook is Stable.
The bonds are secured by the levy of an ad valorem tax on all taxable
property within the district without limitation as to rate or amount.
KEY RATING DRIVERS
STABLE AND DIVERSE ECONOMY: The economy benefits from its close
proximity to Cincinnati and diverse employment opportunities among
education, healthcare and manufacturing. Income indices are above state
levels and comparable to national averages.
STRONG FINANCIAL PROFILE: The district's financial profile is a positive
credit factor characterized by solid reserve levels, active expense
management and permanent operating tax levies with strong voter support.
MANAGEABLE LONG-TERM OBLIGATIONS: The district's overall debt levels are
high due to recent significant borrowing which will meet the district's
capital needs well into the future. Carrying costs inclusive of debt
service, pension and other post-employment benefits (OPEB) are
SHIFT IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental
credit characteristics including the district's healthy financial
profile. Maintenance of solid reserves is a key credit consideration.
The district population of 42,620 encompasses 36 square miles on the
northern edge of Hamilton County and includes small portions of Warren
and Butler counties. It's location near interstates 71 and 75 provides
quick and easy access to downtown Cincinnati which is approximately 15
Enrollment has remained fairly stable over the last few years, totalling
5,580 for the 2013/2014 school year. Enrollment may increase slightly
with open enrollment implemented for the coming school year.
STABLE AND DIVERSE ECONOMY
The economy is broad and benefits from its close proximity to
Cincinnati. Commercial interests comprise 50% of the district's tax base
including General Electric Company, United Parcel Service, Ford Motor
Company, and Humana Right Service (mail order pharmacy). Additionally,
higher education institutions within commuting distance include the
University of Cincinnati, Miami University, Xavier University and Wright
State University. Unemployment rates are not available for the district.
The county (Hamilton) unemployment rate of 5.5% for May 2014 was
slightly above the state rate of 5.3% but below the national rate of
The district's high market value per capita of $100,000 partially
reflects the strong commercial base; per capita income is 113% and 105%
of state and national levels, respectively. Assessed valuation declined
10.9% from 2010 to 2014 due primarily to the phase out of tangible
personal property and a 2012 sexennial reappraisal. The district
currently projects modest inflationary growth through 2017, which Fitch
views as reasonable.
DEMONSTRATED VOTER SUPPORT FOR TAX LEVIES
Property tax revenues represent the largest source of general fund
revenue at 62%. Unlike many Ohio school districts, all district property
tax levies are permanent with historically strong voter support,
providing a relativelevel of financial stability. The most recent levy
passed in March 2012 with a 60% approval rating.
HEALTHY RESERVES AFFORD FINANCIAL FLEXIBILITY
Audited results showing ebb and flow of the general fund balance is very
common among Ohio school districts given the reliance on voter support
for additions to the tax rate. This inherent lack of revenue control is
mitigated by the district's comprehensive long-term financial planning
and demonstrated ability to maintain high reserves.
For fiscal year 2013 (year-end June 30), on a GAAP basis, the district
reported a general fund operating surplus after transfers of $986,000
(1.3% of spending). The unrestricted fund balance totaled $17.2 million
or a healthy 23.2% of general fund spending. For fiscal year-end June
30, 2014, on an unaudited cash basis, the district reported a general
fund ending cash balance of $16.6 million, slightly better than the
forecasted$16.4 million and a strong 24.1% of spending.
District officials have pro-actively managed expenses. Management's
implementation of a budget reduction plan, known as 'Plan A' has enabled
the district to reduce annual expenditures by a cumulative 10% since
The May 2014 five-year cash forecast includes additional savings from
transportation privatization and budget neutral assumptions for recently
expired contracts. Contract settlements outside of the district's
expectations could pose risk to the forecast but Fitch believes
flexibility to absorb additional costs exists in the build-up of
sizeable reserves over the forecast period.
Positive operations through fiscal 2018 lead to cash balances of $30
million or 39.3% of spending in fiscal 2018. Fitch believes projections
are reasonable given management's practice of conservative budgeting
with actual results proving better than forecast.
ABOVE-AVERAGE BUT MANAGEABLE DEBT BURDEN
Fitch considers the district's overall debt burden moderately high at
5.4% of market value. Amortization is slow with only about 20% of debt
retired in 10 years, leaving little flexibility to accommodate future
issuance. However, the district has no plans for additional debt as all
school facilities are new or have recently undergone major renovations.
The district contributes to the School Employees Retirement System
(SERS) and the State Teachers Retirement System (STRS) to fund both
pension and OPEB. Both SERS and STRS are cost-sharing, multiple-employer
defined benefit plans and the district regularly contributes 100% of the
annual required payments for each system. At June 30, 2013, funding
levels for both plans were low at approximately 61% for STRS and 60% for
SERS, based on a Fitch estimated 7% rate of return.
Total carrying costs for debt service, pensions and OPEB are affordable
at 13.4% of total governmental fund expenditures. The SERS plan has been
fully funding its ARC. Pension related costs could rise over time if
STRS moves towards full funding of its actuarially required contribution
(ARC); the plan funded only 46% of the ARC in fiscal 2013. Contributions
to STRS represents 3.2% of the districts fiscal 2013 government fund
spending and Fitch believes the district could absorb a moderate
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates,
CoreLogic-Case-Shiller Index, IHS Global Insight, and National
Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', Aug. 14, 2012;
--'U.S. Local Government Tax-Supported Rating Criteria', Aug. 14, 2012.
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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