OREANDA-NEWS. February 09, 2015. Fitch Ratings has affirmed Cameron Park Community Service District, California's (the district) general obligation bonds (GOs) as follows:

--\\$520,000 election of 2005, series A at 'AA-'.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from an unlimited ad valorem tax levied on all taxable property within the district.

KEY RATING DRIVERS

SOLID FINANCIAL POSITION: The district maintains sound financial operations resulting in a solid unrestricted fund balance, representing more than 70% of annual spending. Limited ability to raise revenues is offset by strong expenditure flexibility.

SOUND ECONOMY/RECOVING TAX BASE: The district's assessed values (AV) experienced declines between fiscal years 2010-2014. However, fiscal 2015 AV reveals a modest recovery in property values. Local wealth indicators are above the state averages and unemployment is below average.

LOW DEBT/AFFORDABLE CARRYING COSTS: Overall debt ratios are low but outstanding debt feature slow amortization. Retiree costs are affordable.

RATING SENSITIVITIES

SOLID RESERVES OFFSET LIMITED ECONOMY: Due to the district's limited operations and a retiree service-oriented economy, the rating is capped at its current level. An unexpected large outlay that significantly reduces operating reserves could apply negative rating pressure.

CREDIT PROFILE

The district is located approximately 30 miles east of Sacramento and serves most of the Cameron Park community. Approximately 18,000 residents live within the district's 6.7 square miles. The district provides fire protection, emergency, parks and recreation, street lighting, waste management services, and landscaping services.

SOLID FINANCIAL POSITION

The district has consistently generated operating surpluses and built up large reserves over the past several fiscal years. The fiscal 2013 (latest audit available) ending unrestricted general fund balance was \\$3.2 million, equivalent to 70% of spending. Management reports that fiscal 2014 is projected to end with a \\$200,000 surplus, equal to about 3.9% of expenditures and transfers out.

The district has a history of conservative budgeting, with actual results typically outperforming budget. According to management, fiscal 2015 operations are ahead of budget and are projected to result in break-even or surplus operations, leaving reserves at strong levels. Fitch considers this expectation reasonable given recent results.

CONCENTRATED REVENUE/FLEXIBLE COSTS

Due to the district's limited operations, it has both concentrated revenues and expenditures. Property tax receipts (66% of total) are by far its largest revenue source, while contracted fire service (65% of total) is the major expense.

The housing market downturn during the last recession led to declines in property tax receipts. The district responded by adjusting its contracted fire service level downward, demonstrating its ample expenditure flexibility. The district retains the flexibility to further adjust service levels with 30 days' notice to the provider, which is seen as a credit strength. In addition, the district could discontinue discretionary capital spending in the event of financial pressure.

Labor costs are well contained. The district only employs 10 full-time staff with paid benefits, and hires many part-time seasonal workers without benefits. Additionally, part of the labor cost is fully reimbursed through an intergovernmental joint power authority agreement for providing ambulance services.

SOUND ECONOMY; LOW DEBT

Since the recession, AV contracted by a cumulative 8%, from \\$2.14 billion in fiscal 2010 to \\$1.94 billion in fiscal 2014. For fiscal 2015, AV increased a solid 4.5% to over \\$2 billion.

Local economic activity is focused on providing services to retirees, which has provided a measure of stability. The county's October 2014 unemployment rate of 6.3% was slightly lower than the state's 7% rate. The district's median household income was 20% higher than the California average in 2013, indicating an above average wealth profile.

In July 2014, the district refunded most of its outstanding 2005 GO bonds through a private placement. The non-callable capital appreciation bonds maturing Aug. 1, 2016 and Aug. 1, 2017 remain outstanding. Overall debt levels remain very low at 1.7% of AV and about \\$2,000 per capita. The district reports no identified capital needs, and maintenance costs are sufficiently covered by surplus revenues. The district also sets aside funds for capital replacement. Fiscal 2013 total carrying costs (debt service, pension, and other post-employment benefits) are an affordable 14% of total governmental expenditures.