Fitch Rates Adams County Sch Dist No. 50, CO 'AA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 9, 2004

Fitch Ratings has assigned a 'AA' rating to the $8.6 million Adams County School District No. 50, Colorado (the district) general obligation (GO) refunding bonds, series 2004. The bonds are selling via negotiation to George K. Baum & Company on Wed., March 10. Fitch has also affirmed the 'AA' rating on the district's $5.7 million in outstanding GO bonds. The Rating Outlook is Stable.

The bonds are direct obligations of the district, payable from a continuing, unlimited ad valorem tax levied on all taxable property within the district. The bonds are secured further by the Colorado School Credit Enhancement Program (rated 'AA-' by Fitch Ratings). Bond proceeds will be used to refund certain GO bonds outstanding for debt service savings and to pay costs of issuance.

The 'AA' rating reflects the district's history of sound financial operations, low debt burden, and healthy and diversified local economy. Offsetting credit considerations are declining enrollment, considerable capital needs, and financial pressure at the state level and its potential impact on state funding of public education. The district is taking steps to retain students, and Fitch will continue to monitor the situation and reevaluate the district's credit quality accordingly.

The district encompasses approximately 17.5 miles in Adams County (the county) in the northwest portion of the Denver metropolitan area and serves portions of the cities of Arvada, Federal Heights, and Westminster as well as certain unincorporated areas of Adams County. The district's tax base is predominantly residential, with income levels above state and national averages. The top ten district taxpayers represent more than 17% of market value, although two of these taxpayers are utilities.

Fiscal 2004 district population is estimated at 74,550. The district is one of seven school districts in the county and had a fall 2003 enrollment of 10,562. District enrollment growth has decreased by 3.3% in the last two years as the area's population aged and families moved to an adjacent district with newer facilities. There is also currently one charter school operating within the district. The majority of the district's schools are over 40 years old, with the most recent renovation in 1985. The district also uses eight portable classrooms. District initiatives to stabilize enrollment include instituting an International Baccalaureate program, all-day kindergarten, and possibly expanding the Montessori program. Total district employment is currently 1,552, 738 of which are teachers.

The direct and overall debt burdens of the district are low and would only increase to a moderate level if the district were to issue debt to address the more than $100 million in capital needs. The district's financial operations are characterized by a moderate degree of reliance on state funding. State revenue provides for equalization of per-pupil expenditures throughout the state and assures a minimum funding level per pupil. The state's level of per-pupil funding for each district varies depending on economic and demographic factors. While Amendment 23 enhances the minimum per-student base, declining state resources due to the poor economy have pressured the state legislature to find methods to reduce school district funding. Also, the district's recent decline in enrollment has forced the district to find ways to reduce expenditures, including reducing teaching staff.

The district's financial position is good primarily due to the $5.9 million operating mill levy increase passed in the November 2002 election. Voters authorized an override increase of more than 11 mills, bringing the district's total mill levy to 50.36 in fiscal 2003. The fiscal 2004 levy was 48.43 mills. State aid as a percentage of operating expenditures and transfers out was 60% in fiscal 2003.

While the district saw negative operating results in fiscal 2001 and 2002, fiscal 2003 results showed a positive operating margin of more than $2.6 million and an ending general fund balance of $8.7 million, or 12.8% of operating expenditures and transfers out. The fiscal 2003 unreserved/undesignated fund balance was $4.5 million, or 6.6% of operating expenditures and transfers out. While the fiscal 2004 revised adopted budget shows an operating surplus, transfers to the capital reserve fund and the charter school fund are expected to drawdown the ending balance by about $2 million.