Fitch Rts Broward County School Board, Florida $38MM COPs 'A+'

Business Wire, April 24, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--April 24, 2003

Fitch Ratings assigns an 'A+' underlying rating to the School Board of Broward County, Florida's (the district's) approximately $37,510,000 refunding certificates of participation, series 2003B. The certificates, expected to be insured, are scheduled to sell on or about May 14 through negotiation led by Citigroup. Fitch also affirms the 'A+' rating on the district's approximately $854 million in outstanding certificates of participation under the master lease, and the 'AA-' rating on the district's $135 million in outstanding general obligation bonds. Series 2003B proceeds will be used to refund the series 1993A certificates maturing in the years 2004 through 2008, and 2010. The Rating Outlook is Stable.

The 'A+' rating assigned to the district's certificates of participation is based on strong project essentiality enhanced by the master lease structure, as well as the district's low debt burden on the county's rapidly growing tax base, diverse economy, and adequate fund balance levels. After several years of operating deficits, fiscal 2002 results show the district increasing fund balance at year-end. Capital needs remain significant, although the expanding county tax base and sizable resources available for capital should keep debt levels moderate. The district's class sizes are above levels set forth by a state constitutional amendment regarding class size, implementation of which is likely to be a challenge to the district going forward.

The 2003B certificates represent an undivided proportionate interest in lease payments made by the district to the trustee, as assignee of the Broward School Board Leasing Corp., which is a not-for-profit corporation created to assist the district in lease financing. The 2003B certificates are on parity with the remaining outstanding series 1993 certificates, as lease payments for both issues are secured by the series 1990A facilities. The obligation of the district to make lease payments is a limited obligation, payable solely from funds appropriated by the school board from available revenues. The 2003 certificates are being issued pursuant to a master lease agreement, which provides strong incentives for appropriation. In the event of non-appropriation, the board must surrender almost all leased facilities to the trustee. Approximately 20% of the district's schools are included in the master lease program.

The district's financial operations appear to have stabilized after several years of operating deficits. Faced with a $41 million funding shortfall from the state (about 2.8% of revenues) in fiscal 2002, the district reduced non-educational program costs and increased the transfer from the capital project fund to the general fund by $25 million, to end the year with a $3.0 million operating surplus. The district plans on increasing the transfer from the capital project fund in years with tight budgetary balance, such as in fiscal 2002, to provide increased financial flexibility. This transfer has been reduced by $5 million in the fiscal 2003 budget. Fiscal 2002 results show unreserved fund balance equal to $69.5 million, or a sound 4.8% of expenditures and transfers out. The district targets maintenance of approximately 3%-4% in unreserved fund balance. According to district officials, fiscal 2003 year-to-date results are on budget.

The district is the nation's fifth largest school system, with 2003 enrollment of slightly more than 266,000 students. According to district officials, the sizable growth in school enrollment appears to have peaked, as the county gets closer to build-out and migration from Miami-Dade County slows. The district's $1.1 billion capital improvement plan, net of debt service, is mostly funded with certificate proceeds and the 2-mill capital outlay levy. The district's debt levels are low to moderate, due in part to continued growth in taxable property values.

The district, which is coterminous with Broward County, is located on the southeast coast of Florida and contains the City of Fort Lauderdale. Wealth levels are above average, and the unemployment rate, at 6.1% in January 2003, is above state and national levels of 5.6% and 5.7%, respectively.