OREANDA-NEWS. Fitch Ratings has affirmed the following underlying ratings for Cameron Independent School District, Texas (Cameron ISD) at 'A+':

--$11.5 million outstanding unlimited tax (ULT) refunding bonds, series 2010;
--The district's Issuer Default Rating (IDR).

The Rating Outlook is Stable.

SECURITY
The bonds are payable from an unlimited ad valorem tax levied against all taxable property in the district.

KEY RATING DRIVERS

The rating reflects Cameron ISD's sound operating performance supported by solid expenditure flexibility and affordable long-term liabilities. These strengths are tempered by very limited revenue-raising ability and modest revenue growth prospects given the nature of the economic base.

Economic Resource Base
The district is located in Milam County in central Texas and has an estimated 2016 population of about 8,300. Top taxpayer concentration is high with the top 10 payers constituting 27% of taxable assessed valuation (TAV), reflective of the district's significant industrial sector. Fitch expects that expanding operations at two manufacturing concerns will contribute in the near term to the current trend of modest enrollment growth. Socioeconomic indicators for the predominantly agricultural Milam County are below state and U.S. averages.

Revenue Framework: 'bbb' factor assessment
The district's revenue growth is historically stagnant, but is expected to improve somewhat given the current modestly positive enrollment trend. Cameron ISD's independent legal ability to raise revenue is severely limited by state law.

Expenditure Framework: 'aa' factor assessment
Operational spending growth is likely to remain in line with revenue gains as both are driven by enrollment. Expenditure flexibility is derived from control over workforce costs and from an affordable fixed cost burden.

Long-Term Liability Burden: 'aaa' factor assessment
Fitch expects the district's long-term liability burden to remain a low burden on resources based on limited capital plans and scheduled amortization of outstanding debt.

Operating Performance: 'aaa' factor assessment
Fitch expects Cameron ISD to maintain significant financial flexibility through an economic downturn based on its expenditure flexibility and substantial operating reserves.

RATING SENSITIVITIES
Expectations for Economy: A diverse expansion of the economic base that materially improves Fitch's evaluation of the district's economic and revenue resources could result in positive rating action.

CREDIT PROFILE

Revenue Framework
State aid provides about three-quarters of the district's operating revenue, followed by property taxes. Revenue growth is primarily a function of enrollment as the state seeks to ensure a certain level of per-pupil spending for all Texas school districts. This formula, as well as the capital intensive nature of industrial properties in the district, helps to mitigate Fitch's concerns over taxpayer concentration.

The district's general fund revenues have been relatively stagnant over the past 10 years, growing at a rate marginally below the U.S. CPI. Fitch expects that enrollment growth, which increased by 4% for fiscal 2016, will continue at a modest pace in the near term, producing revenue gains more in line with inflation.

Cameron ISD's maintenance and operations tax rate of $1.04 per $100 of TAV is at the statutory cap above which voter approval is required, resulting in almost no ability to independently raise revenues.

Expenditure Framework
Cameron ISD's spending profile is led by instruction at nearly 60% of general fund expenditures, and the district occasionally funds capital maintenance items from the general fund (2% of fiscal 2016 spending).

Fitch expects the district's natural spending pace will remain equal to or slightly exceed revenue gains in line with its historical trend and the enrollment-based state funding formula.

The district retains solid expenditure flexibility in labor costs given a lack of collective bargaining and short employment contracts. Carrying costs for debt service, pensions, and other postemployment benefits are affordable at 12% of governmental spending (reduced to 9% after factoring in state support for debt service).

Long-Term Liability Burden
The district's overall debt and net pension liability equal a low 9% of personal income. Cameron ISD has no remaining bond authorization, and management asserts that facility capacity is sufficient to accommodate expected enrollment growth in the medium term. Fitch expects that the district's liability burden will remain low based on limited capital plans.

The district participates in the Teacher Retirement System of Texas (TRS), a cost-sharing, multiple employer pension system. Under GASB 67 and 68, TRS's assets cover 83% of reported liabilities as of fiscal 2015, a ratio that falls to an estimated 75% using a more conservative 7% return assumption. Contributions are determined by state statute rather than actuarially and historically have fallen short of the actuarial level. Recent reforms have lowered benefits and increased statutory contributions in order to improve plan sustainability over time.

The state assumes the majority of TRS employer contributions on behalf of school districts, except for small amounts that state statutes require districts to assume. Like all Texas school districts, the district is vulnerable to future policy changes that shift more of the contributions and liabilities onto districts, as evidenced by a relatively modest 1.5% of salary contribution requirement effective fiscal 2015.

The proportionate share of the system's net pension liability paid by the district is minimal, representing less than 0.5% of fiscal 2015 market value. The district's contributions are currently limited to 1.5% of salaries and the pension costs for salaries above the statutory maximum (total contribution of $7.8 million in fiscal 2015).

Operating Performance
Fitch expects Cameron ISD to maintain financial resilience through an economic downturn based on its capacity to cut expenditures and its historically solid reserve levels. The district ended fiscal 2015 with unrestricted general fund reserves of $4.4 million, or 33% of spending. Management anticipates a fiscal 2015 drawdown of about $500,000 for capital outlay, which would maintain general fund balance above Fitch's expectation for a satisfactory reserve safety margin at the 'aaa' level.

The district has a history of replenishing reserves during times of economic recovery, and management has demonstrated a commitment to maintaining operational balance.