Parma City School District

Located in Cuyahoga County, the district is comprised mainly of Parma City and includes Parma Heights and Seven Hills. For May 2009, Parma City has experienced 60% increase in unemployment to 10.7% from 6.7% in May 2008. Although the district is exposed to the weakened automotive industry with General Motors (GM) position as its top employer and second largest tax payer, growth in the healthcare and education sectors provides some diversification. Manufacturing as a percent of total nonfarm employment for the region equaled 12.5% while education and health services represented 18% in 2009 compared to 13.9% and 15.6% respectively for 2005. According to city officials, GM is planning to close its Parma powertrain plant by the end of 2010, which would likely affect 50 workers but keep open its stamping plant which employs 1,400 workers.

Due to the reliance on voter support for revenue enhancement, voter support is an important credit consideration for all Ohio school districts. While the district historically has passed new levies on the third or fourth attempt, the wider margin of failure for the May 2009 ballot suggests a possible decline in voter support which may stem from recent corruption charges brought against a former board member and/or overall economic pressures on residents. Stabilization of the district's financial position is largely dependent upon adoption of a tax increase as prudent and dramatic spending cuts to date may not be sustainable over the longer term and revenue will likely continue to face pressure due to declining taxable values.

In fiscal 2008, the district experienced a $6.2 million draw on fund balance, but available reserves were still strong at 13.2% of spending, including the reserve for property taxes, providing some cushion as the district considered budget balancing options. Preliminary results for fiscal 2009 show an additional draw of approximately $4.9 million which reduces available reserves to a much lower 3.6% of spending reflecting the third failure of a new 5.5 continuing levy. Fiscal 2009 results were better than budgeted, however, due to severe spending cuts which continue into fiscal 2010 and include laying off 50 teachers and closing two elementary schools. Absent any revenue enhancements for fiscal 2010, the district is projecting an ending unreserved cash balance of $72,000, or a low 0.06% of spending. While cyclical reserve levels and negative cash fund balances are typical of most Ohio school districts as they seek voter support to pass operating levies, revenue growth assumptions for the forecasted period (through 2013) may not accurately reflect the potential for contraction of property tax revenues between assessment years. Property tax revenues represented 65.3% of general fund operating revenues in fiscal 2008. The district has assumed a 1.5% to 1.75% growth in annual property tax revenues while actual residential AV declined 5.3% in fiscal 2010, the third consecutive year, and given the current state of the housing market, may continue to decline.

The district has three emergency levies which together yield $24.9 million or 17.5% of 2009 tax revenues and plans to seek renewal of these levies upon their respective expiration dates in 2010, 2012 and 2014. Voter support for renewal levies has historically been strong. Approximately 82.5% of general fund revenues are derived from continuing levies which offer a degree of financial stability for the district.
The district's direct debt levels are low equaling, 0.7% of market value or $642 per capita. Overall debt levels are also low equaling 1.7% of market value or $1,443 per capita. The 2002 special obligation TANs are secured by a continuous 2.0 mill permanent improvement (PI) levy, while the 2005 TANs are secured by a separate continuous 1.0 mill PI levy with excess revenues fully funding debt service on the COPs. Annual debt service coverage from the combined 3.0 mill levy for the TANs and the COPs combined is projected at 1.35 times for fiscal 2010.