Fitch Rates Long Beach USD, California's $26MM GOs 'AA-'; Outlook Stable

SAN FRANCISCO--(Business Wire)--
Fitch Ratings assigns an 'AA-' rating to Long Beach Unified School District (the
district), California's $26 million of 2009 general obligation (GO) refunding
bonds, series B. The Rating Outlook is Stable. The bonds will sell in
conjunction with $260 million of election of 2008 GO bonds, series A (rated
'AA-'), via negotiation on or about April 1, 2009.

The 'AA-' reflects the district's strong financial management, high degree of
taxpayer and employment diversification, historically solid assessed valuation
(AV) growth, and moderate debt levels. Credit strengths are somewhat offset by
declining enrollment, large but manageable borrowing plans, and recently high
unemployment rates. Key to future credit quality is the district's ability to
maintain its financial position, including adequate fund balance levels, while
contending with declining enrollment and a volatile state funding environment.

The district is the third largest in the state in terms of enrollment and
budget, and covers about 130 square miles of southern Los Angeles County
encompassing an estimated population of nearly 530,000. The district serves the
cities of Long Beach, Signal Hill, Catalina Island, and a major portion of the
city of Lakewood. Demographic shifts, reportedly a result of escalating home
prices in the area, have resulted in declining enrollment, which is down 11.5%
from 2003 to 2009. Management believes that given recent moderation in annual
declines as well as development within the district, enrollment trends will
eventually stabilize.

Although the district is essentially fully built out, ongoing rehabilitation of
existing property and significant redevelopment in downtown Long Beach have
boosted AV, increasing an average 9.6% annually from 2004 to 2009. However, the
effects of the regional and national recession have resulted in significant
declines in average home prices in Long Beach. Thus far, the community's
maturity, the stabilizing effect of proposition 13 on the tax base, and a
sizeable list of residential and commercial development have kept AV growth
strong and resilient through the downturn.

In recent years, the city of Long Beach's (lease revenue bonds rated 'A+' with a
Stable Outlook by Fitch) economy has expanded and diversified from its historic
dependence on aerospace and related activity. In addition to Boeing's still
sizable though slightly reduced presence, the area economy includes a mix of
governmental, educational, healthcare, and transportation (Port of Long Beach)
concerns. After years of declining unemployment, recent figures indicate sharply
increased levels, with Long Beach's December 2008 unemployment rate at 10.5%.
Wealth levels are moderately below state and national levels.

The district's finances improved in fiscal 2006 and 2007 with sizeable surpluses
recorded; however, fund balances dipped in fiscal 2008, as planned, largely
reflecting the spend-down of categorical carryovers. The district's fiscal 2008
results indicate total and unreserved fund balances of $79.2 million (9.8% of
spending and transfers out) and $26.1 million (3.2%), respectively. The district
also has $16 million in a special reserve that could be transferred to the
general fund, which, when added to balances, raises the total unreserved cushion
to $42.1 million (5.2%). If the board approves management's cost-cutting
recommendations, management anticipates increases to the unreserved general fund
balance for the next two fiscal years, followed by a moderate decline in fiscal
2011. However, if financial balance is not achieved, further deterioration in
reserve levels may not be consistent with the current rating category.

Management practices are strong, with the district demonstrating a willingness
to reduce expenditures in order to counteract the effects of declining
enrollment on revenue limit funding. The district cut $40 million and $47
million in fiscal 2008 and 2005, respectively. In addition, management has
indicated it will have to make additional cuts to balance revenues with
expenditures to maintain budget balance for the next several years.

The $26 million of GO refunding bonds, series B, will sell alongside $260
million of election of 2008 series A bonds. The series A bonds are the first
issuance of a $1.2 billion authorization passed by a high 72% of voters in
November, 2008. The series B bonds will refund a portion of the district's
election of 1999 GO bonds, and the series A issuance will refund the district's
$51 million of outstanding 2008 capital project notes, and finance the repair of
existing school facilities, and construction of new classrooms and facilities.
Including the issuance, overall debt ratios are moderately low at $2,261 per
capita (2.48% of AV). While the authorization is substantial, debt ratios are
expected to remain manageable given the size of the district's tax base and
population.

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
Scott Monroe, 415-732-5618, San Francisco
Mark Campa, 512-215-3727, Austin
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com

Copyright Business Wire 2009