Fitch Affirms Osceola County School District, FL COPs & Revs at 'A'

NEW YORK--(Business Wire)--
In the course of routine surveillance, Fitch Ratings affirms the following
ratings for Osceola County School District, Florida (the district):

-- $187.9 million in certificates of participation (COPs) at 'A';

-- $85.8 million in infrastructure sales tax revenue bonds at 'A';

-- Implied general obligation (GO) at 'A+'.

The Rating Outlook is Stable.

The 'A+' implied general obligation rating is based on the district's moderate
debt levels, strong management, and sound reserve levels. Also factored into the
rating are the district's demonstrated ability to manage the recent state
funding reductions and moderating capital needs as previous rapid enrollment
growth levels off. Fitch believes that the district, like all Florida school
districts, will likely face substantial state revenue reductions in the current
economic downturn. However, the district's reserve levels provide a degree of
flexibility to weather the pressured operating environment. The COPs rating also
incorporates its annual appropriation risk which is largely mitigated by the
strong legal features of the master lease-purchase agreement requiring the
district to surrender the majority of its leased facilities if it fails to
appropriate.

The 'A' rating on the sales tax revenue bonds reflects the adequate debt service
coverage, sound legals, and general credit characteristics of the district.
Fiscal 2008 results show maximum annual debt service (MADS) coverage of 1.41
times (x). Year-to-date revenues are down 3.6% from a year prior which would
moderately reduce coverage to 1.35x. Current county projections are
conservative, including a 23.2% monthly decline from a year prior for the rest
of the fiscal year to reach the district's coverage projection of 1.24x MADS for
fiscal 2009. While Fitch does expect further deterioration of pledged revenues
due to the present economic downturn, the Stable Rating Outlook reflects Fitch's
expectation that coverage levels will remain adequate.

Osceola County, which is coterminous with the school district, is located
roughly 14 miles south of Orlando and adjacent to Disney World, leading to the
county's historic concentration in tourism. The Walt Disney Co. (rated 'A' with
a Stable Outlook by Fitch) employs 61,500 employees in Orange and Osceola
counties. The county's economy and population experienced substantial growth in
previous years as the expanding Orlando metropolitan area extended into the
county. Population has increased almost 50% since 2000 as the inventory of
affordable, developable land is reportedly higher here than in neighboring
Seminole and Orange Counties. Unemployment has increased with the recent
economic downturn to 8.7% in December 2008 from 4.9% a year prior.

Although district revenues are vulnerable to state funding fluctuations, the
district has maintained stable operations. Despite $18.6 million in state aid
reductions, including $12.6 million in mid-year cuts, fiscal 2008 ended roughly
balanced with a minimal $0.3 million drawdown. Fiscal 2009 has already resulted
in nearly $20 million in reductions from state revenue. The district has
implemented an effective expenditure reduction plan to offset the majority of
the cuts and plans to drawdown a moderate $4.5 million to avoid severe service
decreases. Unreserved fund balance levels are expected to remain a healthy 13%.
Going forward, the district plans to make service reductions as necessary to
offset state aid reductions and maintain current fund balance levels.

Debt levels are moderate, especially given recent rapid enrollment growth.
Overall debt per capita equals $2,631 per capita and 2.5% of taxable assessed
value. The district's five-year capital improvement plan (CIP) totals $475.8
million, excluding debt service, and is fully funded. Renovating new schools,
capacity projects, and reoccurring projects each account for roughly a third of
the plan. The district plans to issue $50 million in additional COPS over the
next five years. Currently, the district uses a low 0.53 mills for COPS debt
service payments.

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
Rachel A. Barkley, +1-212-908-0514 (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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