Fitch Rates Allen East Local School District, OH GOs Initial 'A+'.

CHICAGO -- Fitch Ratings assigns an initial 'A+' rating to approximately $8.5 million Allen East Local School District, Ohio various purpose general obligation bonds (unlimited tax). The bonds are scheduled to sell through a negotiated underwriting led by Butler Wick & Co., Inc. during the week of June 28. The bonds are direct obligations of Allen East Local School District (the district) and are payable from unlimited ad valorem taxes. Bond proceeds will be used to finance a PK-12 school facility to replace the district's existing school buildings and finance other capital projects, including road improvements, a bus facility, and athletic fields. The Rating Outlook is Stable.

The 'A+' rating reflects the district's affordable debt levels, substantial state financial support, steadily growing tax base, and prudent financial and operational management. The district's debt levels should remain affordable as the new school construction and other district improvements should cover all major capital needs for the next several years.

The district is situated in Allen County and is approximately eight miles east of Lima, OH where some of the district's residents are employed. Allen County is rural in nature with some agriculture; however, per capita sources of earnings are led by manufacturing and services. The county's unemployment rate of 6.5% (as of March 2004) is slightly higher than state (6.2%) and national (6%) rates due to the cyclical nature of a largely manufacturing-based economy. Wealth levels in the county are slightly below average, with per capita personal income totaling 86.7% and 81.8% of state and national averages, respectively. Over the past decade, the district's estimated population of 5,790 has experienced a modest 0.4% annual increase, while student enrollment has experienced slight declines since 1998 due to fewer school-age children in district households.

Since 1998, the district has experienced steady tax base growth, averaging 7.1% annually, largely due to property tax reassessments. With new residential development anticipated throughout the district, including two new housing developments, school officials anticipate increased residential growth over the next several years. As a result of this growth, the district projects a 1% annual enrollment increase through 2014. The top ten taxpayers constitute 10.6% of the district's total tax base. Ohio Power is the district's top taxpayer, accounting for only 2.1% of the tax base.

The district's financial position is sound, as reflected by operating surpluses in four out of the past five years. In fiscal years 2002 and 2003, the general fund balance totaled $1.2 million (19.7% of spending) and $979,000 (14.5% of spending), respectively. The slight decline in the 2003 general fund balance is due to the purchase of property on which the new school facility will be constructed. In 2004, financial operations are expected to be balanced. The district's steady tax base growth and ongoing cost-containment measures provide increased financial flexibility.

With this bond issue, the district's debt totals $1,468 per capita. The steady growth in tax base helps to keep debt levels affordable at 3.4% of full market value. The district's overall debt reflecting Allen County ($825,000) is also affordable at $1,610 per capita and 3.7% of market value. The new school construction financed with this issue should address the district's capital needs and accommodate projected enrollment growth for the next ten years. Debt amortization is level, yet slow, with approximately 26% of principal retiring in ten years.