2008-05-14 23:59:57 -
- Fitch Ratings assigns an 'A+' rating to the Broward County School Board Leasing Corp., FL's approximately $275.4 million certificates of participation (COPs), series 2008A. The COPs are scheduled to sell the week of June 2 and mature serially July 1, 2012-2033. Fitch also affirms the 'A+' rating on the district's $1.7 billion in outstanding COPs and the 'AA-' implied
GO rating. The Rating Outlook is Stable.
The 'A+' rating is based on the strong project essentiality enhanced by the master lease agreement which requires the district to appropriate lease payments on an all-or-nothing basis, as well as the district's credit characteristics which include low debt burden and above-average income levels. While the Outlook is Stable, Fitch has some credit concerns regarding the district's future financial flexibility, the distressed housing market, and the potential for reduced capital funding that may arise from the passage of Florida's Amendment One. Reserves are now fairly modest and Fitch believes that Broward, like all Florida school districts, will need an adequate cushion to counteract potential revenue reductions in the current environment of economic and financial contraction. Fitch assumes that fiscal 2008 results will be in line with district projections of a slight increase in fund balance, and would become concerned if results were notably weaker than expected. Fitch will continue to regularly monitor the COP rating in light of these concerns.
Located on the southeast coast of Florida and containing the city of Fort Lauderdale, Broward County is among the largest counties in population in the U.S. The school district, which is coterminous with the county, has the second largest student enrollment in the state and the sixth in the nation although enrollment has decreased in recent years. Broward County's economy is diversified, with services, government and trade sectors accounting for the largest components of the employment base. As in many areas, the unemployment rate has increased over recent months, to 4% in February 2008 from 3.2% a year earlier, although it remains below state and national rates of 4.5% and 4.8%, respectively. Even though population continues to increase at a healthy pace, growth has slowed somewhat as the county approaches build-out, with population increasing 9.2% since the last census.
The county experienced strong growth in property values in previous years with assessed value increasing 15.1% in fiscal 2006 and 18.8% in fiscal 2007. While the growth remained strong for fiscal 2008 at 11.6%, the state's estimated property values for the county are up only 1% for fiscal 2009 due to the national and concentrated regional slowdown in the housing market. While market value is expected to decline in the coming years, Fitch believes that the provisions of the Save Our Homes legislation afford the district a substantial cushion to withstand market value declines. The county has also experienced declines in housing starts as well as an increase in foreclosure and delinquency rates in the past year.
The district's financial position has eroded recently with three consecutive years of operating deficits which were largely due to a combination of reductions in state funding and larger than budgeted enrollment declines. Enrollment projections have since been modified; the fiscal 2008 actual decline of 0.7% was close to anticipated. The district projects enrollment to continue to decline by approximately 1.3% total between the current year and fiscal 2011. A surplus of approximately $20 million is currently projected for fiscal 2008 due mainly to the larger than budgeted enrollment and an effective expenditure reduction plan which was implemented to counteract mid-year state aid reductions.
The district's unreserved fund balance at the end of fiscal 2007 was 4.4% of spending, above the district's fund balance policy floor of 3%. Based on year-to-date results, unreserved fund balance levels at the end of fiscal 2008 will increase to approximately 5%. Fund balance levels are monitored monthly by the district, and the superintendent and school board are notified immediately if total fund balance levels dip below 3.5%.
Overall debt levels are low at $1,537 per capita and 1.15% of taxable market value. Amortization of outstanding and proposed debt is average with 50.0% of principal being retired in 10 years. The district's current five-year capital improvement plan (CIP) through fiscal 2012 totals $2.4 billion (net of debt service payments). With the recent declines in enrollment, the concentration in capital projects is moving away from construction of new buildings and capacity additions to facilities' improvements. The CIP is fully funded with approximately 56% of funding derived from the 2-mill capital outlay levy. An additional 38% of the plan is funded with the current and future COP proceeds while the remainder of the plan is supported by state funding and impact fees. Impact fee revenues have declined rapidly in recent years but are not currently expected to affect the CIP.
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.
Fitch Ratings, New York
Rachel A. Barkley, +1-212-908-0514
Amy R. Laskey, +1-212-908-0568
Cindy Stoller, +1-212-908-0526 (Media Relations)
