In the course of routine surveillance, Fitch Ratings has affirmed the following ratings for Pasco County School Board, Florida (the school board or district):
--$202 million of outstanding certificates of participation (COPs) issued through June 2007 at 'A';
--$72 million of outstanding sales tax revenue bonds at 'A'.
The Rating Outlook is Stable.
The 'A' rating on the COPs reflects the school district's healthy unreserved general fund balances, limited economy exhibiting below-average wealth levels, and moderate overall debt burden. The essential nature of leased projects enhanced by a master lease-purchase agreement, which requires the district to appropriate lease payments on an all-or-none basis, is also a credit factor. Key rating drivers include the maintenance of operating flexibility in the context of volatile state aid and the successful management of capital needs, given expected declines in the district's tax base.
The 'A' rating on the sales tax revenue bonds reflects the solid coverage of debt service by pledged revenues, sound growth in pledged revenues, and satisfactory legal provisions. The rating also reflects the underlying credit characteristics of the school district. There are no plans to leverage sales tax revenues further or to issue additional COPs.
The sales tax revenue bonds are secured by a lien upon and pledge of a one-cent discretionary sales tax. Fiscal 2008 pledged revenues totaled $27 million and provided a healthy 1.9 times (x) coverage of maximum annual debt service (MADS), occurring in fiscal 2013; MADS coverage is projected to remain at a similar level in fiscal 2009. An expected 15% decline in the district's fiscal 2010 tax base will negatively affect the collection of sales tax revenues. However, officials expect MADS coverage to remain near 1.8x, which Fitch believes is sufficient for the rating level. The district receives sales tax revenues equal to 0.5 mill of its tax base, plus 45% of remaining revenues. As a condition of issuing the bonds, the district lowered its capital outlay millage to 1.5 mills from the formerly 2.0 mill cap.
Overall financial operations are sound and reserve levels are solid. The district's fiscal 2008 unreserved general fund balance equaled 7.3% of spending ($36.1 million), a healthy level for a Florida school district. Officials expect the fiscal 2009 unreserved balance to remain essentially unchanged, despite cuts in state aid and overestimated enrollment growth of approximately 800 students. A wage freeze and deferment of other planned spending helped close the gap, which reportedly reached $25 million. Officials are preparing for a 10% reduction in the fiscal 2010 budget, and they are committed to maintaining an unreserved general fund balance equal to at least 5% of spending.
Moderate overall debt ratios equal $2,164 per capita, or 3.5% of total assessed value. The district currently leverages an above-average 0.9 mill of the capital outlay levy for COPs repayment, and Fitch believes that declines in the district's fiscal 2010 tax base will increase this figure to over 1.0 mill. However, the district has no plans to issue additional COPs and is currently compliant with the state's class size reduction amendment at the school level.
Pasco County is primarily a tourist and retirement destination, given its location along the Gulf Coast. However, eastern portions of the county remain agriculturally based. Unemployment rates slowly rose above state levels this decade, and increased greatly in March 2009 to 11.5%, signaling weakness in the local economy. Per capita personal income levels exhibit similarly downbeat trends.
While the underlying rating on the series 1996 COPs was assigned Feb. 20, 2004, the rating was not reflected on Fitch Ratings' website. With this affirmation, the full rating history is now available.
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.
Contacts:
Fitch Ratings
Ryan A. Greene, 212-908-0315, New York
Kelly
McGary, 813-224-0492, Tampa
or
Media Relations:
Cindy
Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com
