Fitch Affirms Imperial Valley Community College District, at ‘A- ‘ Outlook Stable

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IVC enrollment
FILE PHOTO Students at Imperial Valley College

 

Fitch Ratings affirms the following Imperial Community College District (the district), California’s debt:

–$0.7 million of certificates of participation (COP), series 2004 at ‘A-‘.

The Rating Outlook is Stable.

SECURITY

The certificates are secured by lease payments from the district to California School Boards Association Finance Corp. for use of certain essential assets, subject to annual appropriation by the district and abatement risk.

KEY RATING DRIVERS

FINANCIAL OPERATIONS STILL UNDER STRESS: Despite recent enrollment recoveries and revenue gains, fiscal 2014 will produce the third consecutive year of operating deficits, and draw reserves down to a level close to 6 percent.

IMPROVING FUNDING ENVIRONMENT; CONTINUED COST CONTROL: Funding prospects are enhanced due to passage of Proposition 30 and state revenue improvements. Conservative estimates indicate that with continued cost control, structural balance over the near term is now more likely.

WEAK, NARROW ECONOMY: The area’s economy is dominated by agriculture, though the tax base has diversified some into renewable energy. The unemployment rate has been above 25 percent for the past five years, and income levels are substantially below average.

MODERATE DEBT: District debt ratios are moderate with affordable carrying costs. The debt profile is weighed down by slow amortization and participation in poorly funded CalSTRS.

RATING SENSITIVITIES

STRUCTURAL BALANCE: A failure to realign ongoing expenditures to match ongoing revenues could result in a negative rating action.

CREDIT PROFILE

The district serves a vast, rural area in the desert on California’s southeastern border with Mexico and Arizona, and is the only community college in Imperial County, California (population of 177,000). The main campus is about 200 miles southeast of Los Angeles and 120 miles east of San Diego.

WEAK ECONOMY, MODEST AV CONCENTRATION

The area has developed a significant renewable energy sector in addition to its traditional farming economy. However the local economy remains very weak. The county’s unemployment rate has been consistently extremely high, even reaching 29.9 percent in 2010. With recent employment gains, the unemployment rate (23.8 percent in Nov 2013) is still multiples higher than the state (8.3 percent) and national (6.6 percent) levels. Per capita incomes are equivalent to just over half of the state average (at 56 percent), and 59 percent of national average, while educational attainment rates are significantly below average nationally.