Fitch Rates Broward County School Board Leasing Corp., Florida's $225.2MM COPS 'A+'

Business Wire, June 3, 2004

Business Editors

NEW YORK--(BUSINESS WIRE)--June 3, 2004

Fitch Ratings assigns an 'A ' rating to the Broward County School Board Leasing Corp., FL's approximately $112,465,000 certificates of participation (COPs), series 2004C, and approximately $112,740,000 COPs, series 2004D (auction-rate securities). The 2004C certificates are scheduled to sell on or about June 15 and mature July 1, 2005-2020. The 2004D certificates are scheduled to sell on or about June 29th, maturing July 1, 2020-2029. Both series will be sold through negotiations led by Citigroup. In conjunction with this sale, the district will enter into a swap with Citibank who is rated AA by Fitch. Fitch also affirms the 'A ' rating on approximately $837 million in outstanding parity COP debt and the 'AA-' rating on the district's approximately $126 million of outstanding general obligation debt. The Rating Outlook is Stable.

The 'A ' rating is based on strong project essentiality enhanced by the master lease structure, as well as the Broward County School District's (the district's) low debt burden on the county's rapidly growing tax base, diverse economy and adequate fund balance levels. The district has made progress in balancing financial operations since drawing moderately upon general fund balances in fiscal years 1999-2001. Despite significant capital needs and reliance on state funding which can fluctuate, the district is expected to maintain this trend of operating stability.

Transfers to the general fund from capital outlay millage funds available for maintenance and repair of school facilities, along with non-instructional spending cuts, helped boost balances in fiscal years 2002 and 2003 to a healthy 7.3% of spending (4.9% unreserved). Officials report no significant changes in fund balance levels in fiscal 2004. A recent three-year agreement with the Broward Teachers Union appears reasonable; however, the district, which receives about 50% of its general fund revenues from the state, remains vulnerable to appropriation cuts.

The district's other credit strengths are its growing tax base, which provides flexibility in the use of the capital outlay millage for certificate repayment and facility investment, and diverse economy marked by above-average wealth levels. The district will use roughly 41% of its 2.0-mill capital outlay levy for certificates of participation payments after this issuance; well below its policy of 60%.

Credit concerns include the expanding capital program, driven by student population growth and facility reinvestment needs. The $1.5 billion five-year capital program of the district (excluding debt service), up from $1.1 billion in the prior plan, assumes state funding of mandated class size reductions. Current enrollment of 273,399 is projected to grow 6.2% by 2007-2008.

The district, the U.S.'s fifth largest, operates 238 schools, 47 of which are included in the master lease program. Certificate proceeds from these issuances will fund three new schools and numerous additions and expansions. Incentives for the school board to appropriate lease payments annually are very strong. Non-appropriation would risk loss of all master lease facilities.