Fitch Ratings has assigned an underlying 'A' rating to the School Board of Polk County, Florida's (the district) approximately $36,690,000 variable-rate certificates of participation (COPs), series 2008A (School Board of Polk County, Florida Master Lease Program). The certificates, expected to be insured, are scheduled to price via negotiation on July 22. Prior to closing, the certificates will receive a short-term rating based on the liquidity support provided by Dexia in the form of a standby purchase agreement. Bond proceeds will be used to refund the Series 1998 COPs for an estimated 3% savings of the refunded par. Fitch has also taken the following rating actions on the district's outstanding ratings:
--$231 million COPs affirmed at 'A';
--$227 million sales tax revenue bonds downgraded to 'A' from 'A+'.
The Rating Outlook is Stable.
The 'A' rating on the COPs reflects sound lease provisions, the essentiality of leased assets, and the district's underlying credit quality. District credit characteristics include sound financial management resulting in consistent maintenance of satisfactory general fund balance levels, a diversifying economy, and manageable capital needs. The certificates are secured by lease payments made by the district to the trustee, as assignee of the Financing Corporation for the School Board of Polk County, Florida, which is a not-for-profit corporation created to assist the district in the leasing, financing, and constructing of school projects. The 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 all leased facilities to the trustee.
The downgrade to 'A' on the sales tax revenue bonds reflects declines in pledged revenue that are expected to reduce coverage of maximum annual debt service (MADS). Pledged revenues declined by 2.4% in fiscal year 2007 and are projected to be down an additional 7.8% for fiscal year 2008. Coverage of MADs using the projected $33.3 million in pledged revenue for fiscal year 2008 is reduced to 1.24 times (x). Further, district officials expect revenues to drop an additional 7% in fiscal 2009 which would erode coverage to 1.16x. The bonds are secured by a one-half-cent discretionary local infrastructure sales surtax; proceeds are required to be spent on school capital projects, including debt service on bonds issued for that purpose. Approved by county voters in May 2003, the sales tax took effect on Jan. 1, 2004 and will expire on Dec. 31, 2018.
Historically known for its citrus and phosphate mining industries, Polk County's economy continues to grow and diversify. The county is increasingly attractive as a light manufacturing and distribution center, given its location between the rapidly growing Tampa and Orlando areas and good transportation links; county residents derive roughly twice the state's average earnings from these two sectors. Per capita income is below average, equal to approximately 85% and 84% of state and national averages, respectively.
The district's financial operations are sound. A substantial $14.9 million general fund surplus at the close of fiscal 2007 boosted the unreserved general fund balance to $40.6 million, or 6.1% of expenditures, transfers out, and other uses. The unreserved fund balance grew 50% over the fiscal 2006 level; strong growth in local source revenues and conservative expenditure estimates drove the gain. Considerable enrollment growth has led to double-digit increases in spending in each of fiscal years 2006-2008, but the district's sound financial management has kept financial operations positive. Conservative budgeting for fiscal year 2008 allowed the district to end with a projected surplus, despite having to reduce expenditures by $33 million related to state funding reductions and student enrollment.
The district's fiscal years 2008-2012 capital improvement plan (CIP) totals $466 million, substantially less than the FY 2007 - 2011 $801 million CIP. District officials revised the plan in response to the decline in enrollment growth as well reductions in sales tax revenues, impact fee revenues and uncertainty about state and local funding sources. The district is able to delay many projects as a result of the decline in enrollment. Overall debt levels are moderate at $1,399 per capita and 2.3% of taxable assessed value (TAV).
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts:
Kelly McGary, 813-223-6600, Tampa
Ryan Greene,
212-908-0315, New York
or
Media Relations:
Christopher
Kimble, 212-908-0226, New York
