Fitch Rates School Board of Manatee County, Florida's $30.4MM COPs 'A'

Business Wire, Feb 1, 2005

TAMPA, Fla. -- Fitch Ratings assigns an underlying 'A' rating to the School Board of Manatee County, Florida's (the district) approximately $30.4 million certificates of participation (COPs) (School Board of Manatee County, Florida Master Lease Program), series 2005A. The COPs, expected to be insured, are scheduled to price the week of Feb. 21 through negotiation with a syndicate led by A.G Edwards & Sons. Proceeds will be used to fund the construction and equipping of one elementary school and one middle school. Fitch also affirms the 'A' underlying rating on the approximately $71.3 million outstanding COPs under the master lease program and the underlying 'A' rating on approximately $112 million in sales tax revenue bonds, series 2003. The Rating Outlook is Stable.

The underlying 'A' rating reflects the district's adequate financial management, a stable economic base centered on tourism and other services, moderate debt burden and manageable capital needs, and the strong legal features of master lease-purchase agreements related to this issue, as well as all prior certificates. Financial operations improved in fiscal years 2003 and 2004 after a period of deterioration in fiscal years 2001 and 2002. Although financial margins remain narrow, reserves are adequate for the rating category given the limited revenue-raising capability and sizable expenditure pressures facing Florida school districts.

The COPs are secured by lease payments made by the district to the trustee, as assignee of the Manatee School Board Leasing Corp., which is a not-for-profit corporation created to assist the district in lease-purchase financing. The obligation of the district to make lease payments is a limited obligation, payable solely from funds appropriated by the district from available revenues. The 2005A COPs 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 all leased facilities to the trustee. Approximately 11% of the district's school facilities are included under the master lease.

After two fiscal years of general fund deficits in 2001 and 2002 that reduced undesignated general fund balance to a low 1.3% of general fund spending, financial margins have improved in fiscal years 2003 and 2004. While the district continues to face limited growth in state funding and significant costs associated with class size reduction requirements, it has successfully implemented measures to reduce expenditures to preserve and grow its fund balance. Unaudited results show that the district ended fiscal 2004 with a surplus of $4 million after transfers and an unreserved general fund balance of $7.5 million equal to 3.1% of expenditures and other uses. The district's goal is to maintain an unreserved general fund balance that is equal to at least 3% of revenues. The district's fiscal 2005 budget is balanced though utilizes approximately $3.9 million in reserves on a nonrecurring basis. The district's fiscal years 2005-2009 capital improvement plan (CIP) totals $780 million and includes capital costs needed to meet mandatory class size reductions. The CIP will be funded by a combination of COPs and sales tax revenue bonds, as well as pay-as-you-go funding from a variety of cash sources.

The district is coterminous with Manatee County (estimated population of 286,804), located on the western coast of central Florida. Fitch rates the county's general obligations 'AA+'. The district has 45 schools, 40,923 students, and 2,381 instructors. Enrollment growth has averaged 3.4% annually over the past five years and is projected to grow at an average rate of about 3.3% annually through fiscal 2008. While tourism-related activities and services dominate the economic characteristics of the economy, some diversification is derived from manufacturing; Tropicana Products, Inc., a unit of PepsiCo, maintains a significant presence in the county and employs approximately 3,200. Unemployment rates are below the state and national averages, reflecting local employment opportunities, as well as access to the Tampa Bay MSA.