Fitch Rates School Board of Seminole County, FL's $35.6MM COPs 'A+'

Business Wire, July 23, 2004

NEW YORK -- Fitch Ratings has assigned an 'A+' rating to the School Board of Seminole County, Florida's (the board) approximately $35.6 million certificates of participation (COPs), series 2004. The COPs are expected to sell on or about Aug. 10 via negotiation with a syndicate led by Citigroup. Fitch affirms the 'A+' rating on the board's $219 million in outstanding COPs and the 'AA-' rating on the Seminole County School District's (the district) $18 million in outstanding general obligation bonds. The Rating Outlook is Stable.

The 'A+' rating is based on the district's strong track record of responding to state-funding fluctuations, healthy tax base growth, low overall debt levels relative to market value, and a strong master lease structure. 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, although leveraging of the capital outlay millage is above average. The series 2004 COPs, which were not included in the previous capital plan, are being issued to shore up the CIP after an anticipated 16% increase in construction costs. No future debt is currently planned.

Seminole County is located 23 miles northeast from Orlando and central Florida's main tourism attractions. Though tourism plays a significant role in the local economy, an increased presence of financial services and high technology firms broadens the economic base. Tax base growth has averaged 8.3% over the past five fiscal years, as the economy of Seminole County, an area with above-average income levels, has diversified.

The district ended fiscal 2004 (unaudited) with a modest $4.2 million surplus in the general fund. The unreserved general fund balance equaled 7.0% of expenditures, representing a moderate level of liquidity that is typical of Florida school districts. Its fully-funded, five-year capital plan uses reasonable assumptions concerning tax base and sales tax growth and the operational environment. Moderate enrollment growth of 2% annually is projected. 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.

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 (1.14 mills of 2.0 mills in fiscal 2005) dedicated to COP repayment. This required portion may 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 40% of the district's facilities are in the master lease structure.