APPROXIMATELY $967 IN DEBT AFFECTED INCLUDING THE CURRENT ISSUE
Primary & Secondary Education
General Obligation Bonds Series 2011
Expected Sale Date
General Obligation Bonds
NEW YORK, Jun 29, 2011 -- Moody's Investors Service has assigned an Aa1 rating to the San Diego Community College District's 2011 General Obligation Bonds 2002 Election Series D and 2006
Election Series B. Moody's has also affirmed the existing underlying ratings on
the district's other long-term debt.
The rating reflects the district's enormous tax base and solid resident wealth
levels. The rating also incorporates the district's fiscal position, which has
remained sound despite the recent challenges to the colleges revenue base in
recent years. The district's debt levels are typical for a community college
district. The bonds are secured by the district's unlimited property tax pledge.
-Exceptionally large tax base
-Experienced and strong management team
-Strong fiscal position
-Ongoing state funding pressure
-Local economy still impacted by recession
EXCEPTIONALLY LARGE AND DIVERSE SAN DIEGO AREA TAX BASE
The tax base securing the district's bonds is immense and totaled $134 billion
in 2011, which is among the largest assessed valuations for a community college
district nationwide. The district has absorbed modest declines in value each of
the last two years. The largest decline was in 2011 but at just 1.86%, it was
still minor. Given the size of the tax base, it is highly unlikely that the
district will absorb declines significant enough to pressure the rating by this
factor alone. The 2012 county -wide assessed valuation is preliminarily expected
to increased to by approximately 1%, which could mirror the district's growth as
well. As expected for such a large tax base, tax payer diversity is a credit
strength. No single tax payer represents more than 0.94% of the total assessed
valuation. The top 20 taxpayers are only 6.37% of the total, which is a level
comparable for the top ten tax payers in many community college districts. The
local employment base is similarly diverse and includes the institutional
presence of U.S. Navy, which employs more than 55,000 people. Reflective of the
diversity of employment opportunities in the area, both the county and city
unemployment rates have remained better than the state mark during the
HISTORICALLY STRONG FISCAL POSITION THAT SHOULD REMAIN SO THROUGH THE CURRENT
PERIOD OF FISCAL STRESS
The district has consistently generated ending general fund balances that have
been at or above the median for Moody's -rated community college districts. In
fiscal 2010, the ending fund balance was a strong 20.8%; an improvement over the
already robust 18.7% in the prior fiscal year. For 2011, the district
anticipates level operations that may include a modest surplus in the general
The district is budgeting for a very small 1% general fund deficit in fiscal
2012, which would bring the ending balance to 18% of fiscal 2011 revenues, which
is still a very solid figure and will leave the district well positioned to
manage challenges in fiscal 2013. The district has prepared for the uncertainty
of the state budget impacts by identifying $10 million in various
expenditure reductions that would include eliminating unfunded students,
and continuing a hiring freeze. The district also maintains a substantial level
of additional sources of liquidity that could be loaned to the general fund
across fiscal years. Including these monies, the district's total projected
ending fiscal 2012 fund balance rises to a very strong 30%. Labor contracts are
largely settled through fiscal 2014. The agreements include a
"trombone" clause, which takes effect July 1, 2011. The clause
stipulates that in the event of a serious fiscal downturn, the unions must
negotiate concessions with the district for a period no longer than 90 days.
After that term, the district can unilaterally impose any changes to the
TYPICAL DEBT LEVELS DESPITE THE SIZE OF THE CURRENT ISSUE
The current sale will be approximately $350 million in general obligation bonds.
Still, the direct debt levels will be typically sized at 0.7% of the total tax
base. The debt per capita will be modest at approximately $738. The overall debt
level of 2.6% is also standard for a Moody's-rated community college district.
The current sale will continue the district's substantial capital improvement
plan, which will make significant upgrades to virtually all of the district's
facilities. At the concludion of the various construction projects,
approximately 80% of the district's facilites will have a 50 life span. The
district $498 million in remaining bond authorization though the schedule for
issuance of these monies is not finalized. The debt service schedule for the
current sale assumes 0% growth in the tax base in 2012 and a modest increase in
2013. The current sale also includes a refuding of the district's 2003A bonds
for an estimated debt service savings of $1.2 million.
WHAT COULD CHANGE THE RATING -UP
-Significant and sustained socio-economic improvement
WHAT COULD CHANGE THE RATING-DOWN
-Unexpected and material declines in general fund reserves and cash
2011 Assessed Valuation: $134 billion
Fiscal 2010 general fund balance as a % of revenues: 19.5%
Projected fiscal 2011 general fund balance as a % of revenues :20%
Direct debt as a % of assessed value: 0.7%
Overall debt as a % of assessed value: 1.7%
The principal methodology used in this rating was General Obligation
Bonds Issued by U.S. Local Governments published in October 2009.
Information sources used to prepare the credit rating are the following: parties
involved in the ratings, public information, confidential and proprietary
Moody's Investors Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available on the
credit satisfactory for the purposes of assigning a credit rating.
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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.
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Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S ASSIGNS Aa1 RATING TO SAN DIEGO CCD'S GENERAL OBLIGATION BONDS
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