Fitch Rates School Board of Seminole County, Florida's $36.4MM COPs 'A+'

Business Wire, Oct 17, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 17, 2003

Fitch Ratings has assigned an 'A ' rating to the School Board of Seminole County, Florida's (the board) approximately $36.4 million certificates of participation (COPs), series 2003B. The COPs are expected to sell on or about Nov. 11 via negotiation with a syndicate led by UBS Financial Services Inc. Fitch affirms the 'A ' rating on the board's $194 million in outstanding COPs, and the 'AA-' rating on the Seminole County School District's (the district) $26 million in outstanding general obligation bonds. The Rating Outlook is Stable.

The Stable Outlook is based on the district's consistent financial results that Fitch expects will remain steady, sound budgeting practices, growing tax base, and declining leverage of the tax levy for capital outlay purposes. The district's satisfactory capital planning efforts and the receipt of proceeds from a countywide sales tax aid it in its effort to meet moderate enrollment growth. The series 2003 COPs, which were not included in the previous capital plan, are being issued to accelerate construction of a new elementary school and conversion of a middle school to a high school. No future debt is currently planned but another surge in enrollment could lead to more borrowing.

The district has a strong track record of responding to state funding fluctuations; healthy tax base growth; low overall debt levels relative to market value; a fully-funded, five-year capital plan, using reasonable assumptions concerning tax base and sales tax growth and the operational environment; and moderate enrollment growth of about 2% annually. Unreserved general fund balance (unaudited) equaled 5.5% of expenditures at the end of fiscal 2003, representing a moderate level of liquidity that is typical of Florida school districts. The district's physical plant has a low average age, owing to large investments in capital during the past decade. In 2001, voters approved a 10-year extension of a one-cent infrastructure sales tax, one-quarter of the proceeds of which are allocated to the board for capital investment.

Tax base growth has averaged 8.4% over the past five fiscal years, as the economy of Seminole County, an area with above-average income levels, has diversified. Broadening of the economic base comes from an increased presence of financial service and high-technology firms, among others.

Credit weaknesses include the vulnerability faced by all Florida districts to changing funding or operational mandates from the state and an above average portion of capital outlay millage (1.1 mills of 2.0 mills) dedicated to COP repayment. This required portion will decline if the district does not issue additional debt over the next five years, in accord with its current plans.

The COPs benefit from a master lease structure typical of Florida school districts. Lease payments to cover COP principal and interest payments are payable only from funds appropriated by the board for such purpose. Incentives to appropriate are very high, as more than one-third of the district's facilities are in the master lease structure. Failure to appropriate under any existing lease may result in the district having to surrender possession of most COP-financed facilities.