TEXT-Fitch affirms Columbus City School District, Ohio GOs at 'AA+'

Thu Feb 7, 2013 1:35pm EST

Related Topics

Feb 7 - Fitch Ratings has affirmed the following Columbus City School
District, Ohio unlimited tax general obligation (ULTGO) ratings at 'AA+':

--$8.6 million school facilities construction and improvement bonds, series
2004;
--$268.3 million general obligation (GO) school facilities construction and
improvement refunding bonds, series 2006;
--$5.7 million GO school facilities construction and improvement bonds, series
2007;
--$15.8 million GO school facilities construction and improvement bonds, series
2008;
--$72 million GO school facilities construction and improvement bonds, series
2009.

The Rating Outlook is Stable.

SECURITY

The GO bonds are secured by an ad valorem tax to be levied upon all taxable
property within the district, without limitation as to rate or amount.

RATING SENSITIVITIES

STRONG BUT CYCLICAL RESERVES: Financial reserves are strong, but expected to
decline to more moderate levels before a new operating levy is approved by
voters. Continued sound reserve levels are contingent upon such approval.

STRONG VOTER SUPPORT COULD BE VULNERABLE: The district historically has enjoyed
strong voter support for new levies and bond authorizations. The effect that
recent negative publicity may have on future voter support is unknown.

VIBRANT AND DEEP ECONOMY: The city's growing economy benefits from the
stabilizing presence of various levels of government, Ohio State University
(OSU), notable healthcare institutions, and financial services. Unemployment is
low, but income levels are weak.

MANAGEABLE LONG-TERM OBLIGATIONS: Debt levels should remain moderate, even if
anticipated debt is issued in the near term. Carrying costs for pension, other
post-employment benefit (OPEB) and debt service are affordable.

CREDIT PROFILE

Columbus City School District is located in Franklin County and serves the city
of Columbus (rated 'AAA' by Fitch) and a number of surrounding townships. While
the district's population continues to increase, student enrollment has declined
an average of 2% annually over the last five years and is projected by the
district to continue at a similar rate in the future.

STRONG RESERVES AFFORD FINANCIAL FLEXIBILITY:

Financial performance generally has been sound, characterized by maintenance of
strong but cyclical reserves. The district typically builds up general fund
balance following the passage of a new operating millage, then draws down some
reserves before requesting voter approval for another millage. This pattern is
common to Ohio school districts and underscores the importance of voter support
to financial health. The district depends on new levies because existing millage
rates cannot be adjusted for tax base declines, and do not benefit from tax base
increases.

Primary support for operations comes from property taxes, which provide 53% of
revenues, followed by state foundation aid, which provides 32%. The state of
Ohio has announced plans to change the formula for distribution of state aid,
beginning with the 2014 biennium. The impact of these changes on the district is
currently unknown. However, the governor has said that no district will lose
state aid in the first year of the new formula, so districts should have some
time to adjust.

The district recorded a modest (0.5% of spending) net operating deficit after
transfers in fiscal 2012, following three years of healthy net operating
surpluses. The fiscal 2012 unrestricted general fund balance remained ample at
33.8% of spending, representing significant cushion available to carry the
district through until the next new millage request in 2013 or 2014.

Officials project ending fiscal 2013 with a moderate net operating deficit of
approximately $49 million, which would leave the unrestricted general fund
balance at a still strong 27% of spending. The district's five year forecast
shows net operating deficits in fiscals 2014 and 2015 would result in a negative
general fund balance, absent a new millage request.

VOTER SUPPORT CRUCIAL TO FUTURE FINANCIAL HEALTH

Favorably, all of the district's operating millages are permanently continuing.
However, the district is still dependent on voter approval for new millages, to
accommodate increased costs. In recent years, the district has requested new
operating millages every four years, although it did not do so in 2012, four
years after the last new millage in 2008.

Voters have shown strong support for the district's operating millages and debt
authorizations. The last four operating millages have been passed on the first
attempt and voters have not rejected a millage since 1990. Voters also showed
strong support for large bond authorizations in 2002 and 2008.

Fitch believes this strong level of support could be vulnerable given recent
negative publicity. The state recently issued a report identifying internal
flaws relating to the district's collection of enrollment and attendance data.
This raises concerns about the strength of internal controls; however, the
district is in the process of hiring a chief information officer to standardize
and improve data collection processes.

VIBRANT AND DEEP ECONOMY

The Columbus area economy has been historically strong, anchored by the presence
of state and federal government, and Ohio State University. Employment in the
greater Columbus area is diverse with major employers representing government,
insurance, manufacturing, banking and medical sectors. Unemployment rates as of
November 2012 in the city and county are 5.5% each, which compares favorably to
the state and national rates of 6.5% and 7.4%.

Assessed value (AV) within the district declined slightly in 2011 and by a more
significant 7.4% in 2012, a result of the six-year reappraisal. Fitch expects
that AV will remain relatively flat for the next few years. The tax base is not
concentrated as the top taxpayers make up less than 8% of total AV. Wealth
levels, as measured by per capita personal income in the county are average at
106% and 96% of the state and national levels, respectively.

MANAGEABLE LONG-TERM OBLIGATIONS

The district's debt burden is moderate at $1,833 per capita and 3.5% of market
value. The district may seek voter approval for another $130 million to $160
million of additional debt next fall. Debt burden should remain moderate, even
after the anticipated issuance.

The district contributes to the School Employees Retirement System (SERS) and
the State Teachers Retirement System (STRS) to fund both pension and OPEB. Both
SERS and STRS are cost-sharing, multiple-employer defined benefit plans and the
district regularly contributes 100% of the annual required payments for each
system, although less than 100% was recorded in fiscal 2012 due to a timing
issue. Carrying costs are affordable with debt service, pension and OPEB
claiming 14% of governmental funds (net of capital projects funds) spending. The
debt amortization rate is slightly below average.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

In addition to the sources of information identified in Fitch's Tax-Supported
Rating Criteria, this action was additionally informed by information from
Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index,
IHS Global Insight, National Association of Realtors.

Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
FILED UNDER: