Fitch rates School District A

Fitch Ratings assigns an 'A' rating to Osceola County School Board, Florida's (the district) approximately $36.5 million certificates of participation (COPs), series 2009A. TConcurrently, Fitch affirms the district's $169 million of outstanding COPs, a portion of which will be refunded with this issuance. The Rating Outlook is Stable. The 'A' rating on the COPs reflects strong legal features of the master lease structure as well as the general credit characteristics of the district, including moderate debt levels, sound management, and healthy 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 a volatile operating environment in the current economic downturn. However, the district's reserve levels provide a degree of flexibility to weather the pressured operating environment. Over the next few years, the district will also need to continue to balance its capital needs with a decreasing tax base.

The COPs are secured by lease payments made by the district to the trustee, as assignee of the Florida School Boards Association, Inc., which is a not-for-profit corporation created to assist in lease purchase financing. The obligation of the district to make lease payments is limited and payable solely from funds appropriated by the district from available revenues. The COPs were issued pursuant to a master lease agreement which, in the event of non-appropriation, requires the district to surrender all leased facilities to the trustee. Over 20% of student stations are in facilities included in the master lease.

Although district revenues are vulnerable to state funding fluctuations, the district has maintained stable operations. Despite $22 million in state aid reductions, fiscal 2009 ended with a $5.3 million surplus, increasing the unreserved fund balance to a sound 16% of spending. Fiscal 2010 year-to-date performance indicates a moderate $2 million drawdown due primarily to capital needs for a new textbook adoption. Fitch expects state funding for schools to be unstable over the next few years. The district's above-average reserves should provide it with more than adequate flexibility to adapt to any unplanned revenue reductions.