Fitch Rates Polk County School, FL's COPs 'A'; Downgrades Sales Tax Rev Bonds to 'A-'

NEW YORK--(Business Wire)--
Fitch Ratings assigns an underlying 'A' rating to the School Board of Polk
County, Florida's (the district) approximately $46,825,000 certificates of
participation (COPs), series 2009A and $37,050,000 COPs series 2009B
(collectively the COPs). The COPs will be issued as weekly variable rate demand
bonds (VRDBs) with a letter of credit (LOC) from Wachovia. Fitch expects to
provide ratings based on the LOC at a date closer to the scheduled pricing date
of July 29th. Proceeds will be used to refund the district's outstanding series
2003A and 2008 COPs, respectively. Fitch also affirms the district's $214.8
million in COPs, including the COPs to be refunded with this issuance, at 'A'.
The Rating Outlook on the COPs is Stable.

Concurrently, Fitch downgrades the rating on the district's $235.4 million in
outstanding infrastructure sales tax revenue bonds (the sales tax bonds) to 'A-'
from 'A' and revises the Outlook to Negative from Stable.

The 'A' rating on the COPs reflects the sound lease provisions, the essentiality
of the 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, high
exposure to swaps and swaptions, and manageable capital needs. The COPs 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-' from 'A' on the sales tax revenue bond rating is based on
two years of pledged revenue declines and Fitch's expectation that declines will
continue through at least fiscal year 2010, eroding debt service coverage to
levels inconsistent with the 'A' rating. The revision of the Rating Outlook to
Negative from Stable reflects the likelihood of a longer term retraction in
pledged revenue as well as uncertainty regarding the timing of a recovery and
level at which stability is achieved. Further influencing the downgrade and the
Outlook revision is significant weakening of the local economy over the last 12
months, characterized by a high jobless rate and housing market indicators that
suggest foreclosure rates are well in excess of national levels which may
negatively influence household spending.

A half-cent voter approved infrastructure sales tax secures the bonds. Proceeds
are required to be spent on school capital projects, including debt service on
bonds issued for that purpose. The tax is set to expire at the end of calendar
year 2018, two months after the final maturity of the bonds. Pledged revenues
provided 1.26 times (x) maximum annual debt service (MADS) coverage in fiscal
2008. Year to date fiscal 2009 data shows a 6.5% reduction in revenues from the
same period a year prior which would lower coverage to a slim 1.18x if declines
are consistent with earlier months.

Historically known for its citrus and phosphate mining industries, Polk County's
economy has diversified in recent years into health care, light manufacturing
and distribution. Unemployment has increased with the current economic downturn
to 10.8% in May 2009 from 5.0% a year prior, both in excess of national
averages. Per capita income is below average, equal to approximately 85% and 84%
of state and national averages, respectively. Foreclosure rates have also
increased and are double the national average although in line with the state
average.

The district's financial operations are strong as the district has successfully
managed its previously rapid enrollment growth. Despite a $4.4 million drawdown
in fiscal 2008 due to reductions in state aid, the district has realized
surpluses in five out of the last seven audited years. Unreserved fund balance
levels at the end of fiscal 2008 remained sound at 5.8% of spending. District
officials expect a small surplus in fiscal 2009 which just ended and the fiscal
2010 budget is balanced with no use of reserves.

Debt levels are moderate with above average amortization. The district's capital
improvement plan (CIP) for fiscal 2009-2014 totals a manageable $320.1 million
including debt service and is substantially smaller than in previous years due
to a combination of declines in enrollment growth projections and reductions in
property tax and sales tax revenues. Additionally, the plan is anticipated to be
reduced further over the next few years with projects spread over a longer
period.

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, 212-908-0514 (New York)
Kelly McGary, 813-224-0492 (Tampa)
Media Relations:
Cindy Stoller, 212-908-0526 (New York)
cindy.stoller@fitchratings.com

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