OREANDA-NEWS. Fitch Ratings has affirmed the following Firebaugh-Las Deltas Unified School District, California bonds:

--$6.3 million general obligation (GO) bonds at 'A+'.

The Rating Outlook is Stable

SECURITY
The bonds are secured by an unlimited ad valorem tax on all taxable property within the district.

KEY RATING DRIVERS

STRONG FINANCIAL PROFILE: The district's strong financial profile reflects healthy fund balances, sound financial operations, and conservative budgeting practices.

INCREASED FUNDING: The district benefits from the state's revised funding formula that allocates additional funding to districts with higher percentages of English learners or low income students. Approximately 93% of the district's student body fall into these categories.

WEAK ECONOMY; CONCENTRATED TAX BASE: The district's tax base is highly concentrated in agricultural and is characterized by high unemployment and low wealth levels.

MANAGEABLE LONG TERM LIABILITIES: Fitch considers the district's overall debt burden moderate, and amortization is very rapid. Fitch expects currently low carrying costs to rise to more moderate levels given future growth in pension costs.

RATING SENSITIVITIES

STRONG FINANCIAL MANAGEMENT: The rating is sensitive to shifts in fundamental credit characteristics including the district's healthy financial position. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE
Firebaugh-Las Deltas Unified School District covers 98 square miles in California's San Joaquin Valley with approximately three-quarters of its assessed value situated in Fresno County (Fitch rated implied GO 'AA-') with Madera County comprising the last quarter. The district serves approximately 2,200 elementary to high school students.

STRONG FINANCIAL PROFILE
The district's financial profile is strong despite several years of volatile state funding. Operating surpluses (after transfers) were recorded in six of the last seven audited fiscal years. The district ended fiscal 2014 with a $300,000 surplus (1.4% of spending). Fiscal 2015 budget indicates a moderate drawdown (1.7% of spending), though the district has a solid history of out-performing such projections.

Financial reserves remain at healthy levels. The district's ending unrestricted balance for fiscal 2014 was approximately $7.1 million or 33% of spending. The district's solid reserves and good liquidity position ($3.2 million in cash at the end of fiscal 2014) have helped offset cash flow pressures stemming from the state's funding deferrals. The district has not needed to borrow externally for cash flow purposes.

INCREASE STATE FUNDING
In addition to recent years' overall increases in K-12 funding levels (as determined by the state's Proposition 98) the district is a significant beneficiary of the Local Control Funding Formula (LCFF), which allocates higher proportions of Proposition 98 funding to districts with greater concentrations of students who are economically disadvantaged, English-learners, and foster care youths (cumulatively referred to as unduplicated count). The district's unduplicated count is a very high 93%. The district's share of overall Proposition 98 funding will continue to grow until LCFF has been fully implemented. The LCFF implementation schedule will depend on future state revenue growth.

LIMITED ECONOMY WITH CONCENTRATED TAX BASE
The limited local economy is heavily reliant on agricultural production and shifts to nut production are having a favorable impact. However, the district is characterized by a high unemployment rate and low wealth levels. Using Fresno County as a proxy for the district, the unemployment rate was a high 9.5% (June 2015) compared to the national average of 5.5%. The district's median household income was approximately 54% of the state average.

The district's tax base is concentrated in agricultural interests. The district's top 10 taxpayers made up 42% of the district's assessed value (AV) and are primarily agriculturally based. This includes the top taxpayer, Paramount Land Company, which comprises 22% of the district's AV. Overall AV performance has been positive over the past several years, growing modestly through the recession before increasing an average 13.5% annually for the past three years.

MODERATE DEBT BURDEN
Overall debt ratios are moderate at $2,200 per capital and 2.3% of AV. Amortization is rapid with 88% of principal retired in 10 years with no near-term capital needs.
The district participates in California Public Employees 'Retirement System (CalPERS) as well as the more poorly funded California State Teachers' Retirement System (CalSTRS) pension systems. In fiscal 2015, the state implemented a multi-year pension contribution rate hike that would more than double current CalSTRS rates through fiscal 2021. Contributions to CalPERS are also expected to by 50% over the next five years.

Total carrying costs (debt service, statutorily required pension contributions, and pay-as-you-go OPEB costs) are a low 11% of total governmental expenditures. However, Fitch expects total carrying costs to rise to more moderate levels given future growth in pension costs.