Fitch Rates Allen East Local School District, Ohio Rfdg GOs 'A+'.

CHICAGO -- Fitch Ratings assigns an 'A+' rating to approximately $6.1 million Allen East Local School District, Ohio, various purpose refunding bonds (general obligation [GO]) (unlimited tax). The bonds are scheduled to sell through a negotiated underwriting, led by Butler Wick & Co., Inc. as early as April 24. The bonds are direct obligations of Allen East Local School District (the district) and are payable from unlimited ad valorem taxes. Bond proceeds will refinance a portion of the outstanding various purpose school improvement bonds, GO (unlimited tax) issued in 2004 (2004 bonds) for the construction of a new 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. In addition, Fitch affirms its 'A+' rating on approximately $2 million of outstanding 2004 bonds not refunded by this issue. The Rating Outlook is Stable.

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

The district is located in Allen County in western Ohio, approximately eight miles east of Lima, Ohio and just east of Interstate 75 which provides access to Dayton and Toledo, each approximately 80 miles from the district. Allen County is largely rural in nature with some agriculture with local non-farm earnings led by manufacturing and services. The county's February 2007 unemployment rate of 6.3% is higher than state (5.7%) and national (4.9%) rates, but well below the county's peak rate of 7.7% in February 2003, due to the cyclical nature of a largely manufacturing-based economy. Wealth levels in the county are slightly below average reflecting its more rural nature, with 2004 per capita personal income totaling 88% and 83% of state and national averages, respectively; however, per capita personal income average annual growth of 3.0% over the last five years exceeded the state (2.5%) and nation (2.6%). The district's estimated 2003 population of 5,750 has remained fairly stable over the last several years, from the census 2000 population of 5,790. Enrollment has decreased slightly to 1,112 students in 2006 from 1,245 students in 1997, an average annual loss of 1.2% due to fewer school-age children in district households.

Over the last eight years, the district has experienced fairly steady tax base growth, averaging 5.6% annually, largely due to property tax reassessments. Growth continues throughout the county, with the district well-situated along the main route connecting Lima to the eastern portion of the county. School officials anticipate some residential growth over the next several years, with the new building including sufficient capacity for a total of 1,400 students. The top 10 taxpayers constitute 10.3% of the district's total tax base in 2006, led by Rudolph Foods Company at 4.0% of the tax base.

The district's financial position is sound, as reflected by operating surpluses in seven out of the past eight years. A small decline of approximately $0.2 million occurred in the fiscal 2003 (year ended June 30) general fund balance due to the purchase of property used to build the new school facility. General fund balances now exceed pre-fiscal 2003 levels at nearly $2 million or 27.9% of expenditures and transfers out in fiscal 2006, better than the $1.2 million (19.7%) general fund balance in fiscal 2002. In fiscal 2007, Fitch anticipates break-even or a small surplus for the district's general fund. The district's steady tax base growth and ongoing cost-containment measures provide increased financial flexibility.

The district's only outstanding debt includes the unrefunded portion of its 2004 issuance. With this issue, direct debt totals $1,402 per capita. The steady growth in tax base helps to keep debt levels affordable at 2.9% of full market value. The district's overall debt reflecting Allen County ($1.2 million) is also affordable at $1,604 per capita and 3.3% of market value. The need for future debt issuance is very low, since the new school addresses the district's capital needs and projected enrollment growth for approximately 10 years. Debt amortization is below average with approximately 37% of principal retiring in 10 years.

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