Fitch Affirms Leon County School Board, Florida GO, COP & Sales Tax Bond Ratings

NEW YORK--(Business Wire)--
As part of ongoing surveillance, Fitch Ratings affirms the following outstanding
ratings issued by the Leon County School Board (the district):

--$3,565,000 general obligation (GO) bonds, series 2003 at 'AA';

--$59,255,000 certificates of participation (COP), series 2006 at 'AA-';

--$25,510,000 COP, series 2005 at 'AA-'; and

--$28,035,000 sales tax revenue bonds, series 2003 at 'AA-'.

The Rating Outlook is Stable.

The 'AA' rating on the GO bonds reflects Leon County's (the county) stable
economy (which is anchored by the state capital in Tallahassee and two major
public universities, Florida State University and Florida A&M University), a low
debt burden coupled with rapid principal amortization, and the district's
historically sound financial profile and ample reserve levels despite recent
draw downs to offset reductions in state funding.

The 'AA-' rating on the COP incorporates the underlying credit characteristics
cited above and the limited obligation of the district to make lease rental
payments. Also, lease payments are subject to appropriation, with this risk
somewhat moderated by the requirement that lease payments be appropriated on an
all-or-none basis; in the event of non-appropriation, the district must
surrender all leased facilities to the trustee. Facilities leased are highly
essential and include new high, middle, and elementary schools and additions at
five other schools that collectively house over 4,100 students or approximately
14% of enrollment. Florida school districts are permitted to use 1.31 mills of
the 1.75 mill capital outlay levy to make lease rental payments on COP
indebtedness, and the district has significant capacity within its capital
outlay levy to meet its maximum annual lease rental obligation.

The 'AA-' rating on the sales tax revenue bonds reflects the strong 2.4 times
(x) coverage of maximum annual debt service (MADS) by pledged revenues in fiscal
2008. Current coverage levels partially mitigates the risk to declines in sales
tax revenues due to the deepening recession as collections through the first
five months of fiscal 2009 are down 7.2% from the year prior. Proceeds of the
pledged tax can only be applied to capital expenditures associated with school
construction or for the servicing of bond indebtedness that funded these types
of projects. Legal provisions include a first lien on sales tax proceeds and a
debt service reserve fund equaling the maximum level permitted under tax law.
Final maturity of the bonds is a short three years (July 1, 2012), designed to
match the voter-approved tax's expiration.

The district has demonstrated sound financial management with above-average
unreserved fund balances that have equaled 11.6% to 13.9% of operations and
transfers out from fiscal 2003 to fiscal 2007. However, the district recently
used a portion of its fund balance to offset state funding cuts, and plans to do
so again in fiscal 2009. The district used $3.6 million of its reserve during
fiscal 2008, finishing the year with $16.1 million in unreserved funds, equal to
a still good 6% of spending. Also, the district retains $10 million or 3.7% in a
reserve for local carryover projects and inventory which is a self-imposed
reserve that could be made available to support operations at the discretion of
the district board. The district is anticipating using $3 million to $5 million
of reserves in fiscal 2009, and has identified a number of cost cutting measures
if additional reductions in state funding are implemented. These measures total
approximately $20 million through fiscal 2010. The ability to offset state
funding cuts while retaining satisfactory unreserved fund balance levels is
critical to the future rating direction.

Overall net debt is low equal to 1.8% of total assessed value (TAV) and $1,174
per capita. Amortization is above-average with 60% of principal repaid within 10
years. Major capital spending is complete and the district reports no plans to
issue additional debt. The district has identified approximately $96 million in
capital needs which focus on energy efficiency and building remodeling and
renovation that it plans to fund from sales tax and capital outlay revenues
through fiscal 2010. The district is in the process of conducting its school
plant survey that will be in effect beginning July 1, 2010.

Leon County is located in northwestern Florida. The numerous state governmental
offices associated with the capital complex and a large student population owing
to the campuses of Florida State University and Florida A&M University provides
a stable base for the area economy. The unemployment rate is up to 5.4% as of
December 2008 from 3.2% a year earlier, however, unemployment levels compare
favorably to the state and the nation. The county has generally experienced a
more moderate rate of population and tax base growth relative to the state due
in large part to the limited availability of developable land. The local housing
market appears to be performing well relative to the nation based on lower rates
of home foreclosures and loan delinquencies. Nonetheless, Fitch believes the
county remains vulnerable to some property tax base softening. Wealth levels are
modestly below-average reflecting the dominance of government employment and a
large student presence.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of
tax-supported and water/sewer revenue bond ratings which, if adopted, may result
in an upward revision of this rating (see Fitch research 'Exposure Draft:
Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is
deferring its final determination on municipal recalibration. Fitch will
continue to monitor market and credit conditions, and plans to revisit the
recalibration in first quarter-2009.

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
Michael Rinaldi, +1-212-908-0833, New York
Kelly McGary, +1-813-224-0492, Tampa
Media Relations:
Cindy Stoller, +1-212-908-0526, New York
cindy.stoller@fitchratings.com

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