Moody's Revises Rating on Palm Beach County School District, Florida to A from A1

Business Wire, May 8, 1996

NEW YORK--(BUSINESS WIRE)--May 8, 1996--Moody's Investors Service has been revised the rating on Palm Beach County School District's General Obligation bonds to A from A1 based on a severely weakened financial position exacerbated by a rapidly growing school enrollment, narrow operating tax rate margins, and a very extensive capital program which will further pressure operating costs. The appointment of a new superintendent and some positive initial steps taken to stabilize operations are noteworthy but will require time to develop.

This rating review is the culmination of a credit comment dated May 30, 1995. In that comment, concern was expressed about the district's increasing revenue and expenditure pressures. This review has been concluded after the reception of final fiscal 1995 financial information, meeting with district officials and board-approved actions including appointment of a new superintendent and establishment of a contingency reserve.

Finances Characterized by Narrow Operating Parameters and Depleted Reserves

Operating flexibility is jeopardized by a narrow cash position, depleted unrestricted operating balances and proximity to operating tax rate limits. Build-up of a 3% operating reserve over six years beginning in fiscal 1997 is a positive step.

A Moderate Debt Position With a Significant Capital Program

General Obligation bonds mature rapidly within twelve years. However, the sizable $1.45 billion capital program to address overcrowding and new growth includes expansion of a Certificate of Participation program and need for an additional funding source. Officials may approach voters next Spring for an increase in the sales tax to help fund the program

Diverse Service-Oriented Economy with Mature Tourism Component

Diverse economy primarily based on tourism and agriculture and related service industries. Manufacturing and construction are other important economic sectors. Labor force continues to expand and unemployment remains moderate.

CONTACT: Moody's Investors Service, New York

John Incorvaia, Vice President, 212/553-0501