Fitch Rates Boulder Valley School Dist No. RE-2, Colorado $120MM GOs 'AA'.

AUSTIN, Texas -- Fitch Ratings assigns an 'AA' underlying rating to $120 million of Boulder Valley School District No. RE-2, CO (the district) general obligation (GO) bonds, series 2007, scheduled to sell competitively on Feb. 27. James Capital Advisors Inc. and Public Finance Associates LLC are serving as the district's co-financial advisors. Additionally, Fitch affirms the 'AA' rating on the district's $125.9 million outstanding GO bonds. The Rating Outlook is Stable.

The bonds are direct obligations of the district and are payable from unlimited ad valorem tax levied, without legal limitation as to rate or amount, on all taxable property located within the district. Bond proceeds will be used to renovate existing schools and to pay costs of issuance.

The 'AA' rating reflects the district's below-average debt levels, improved financial operations, strong voter support, and high property wealth. The district includes a wealthy residential and corporate tax base located primarily in Boulder County with a small portion in Gilpin County. Consistent voter support for both operational and capital needs, coupled with improved financial management practices, has enabled the district to return to financial stability. In particular, continued conservative budgeting of the district's declining enrollment base will be key to maintaining structural balance within the district's finances.

Located 30 miles northwest of Denver, the district includes the cities of Boulder, Lafayette, and Louisville plus the City and County of Broomfield within its large 500 square mile boundary. The local economy is anchored by the University of Colorado in Boulder with a current enrollment of about 35,000. Private employers include high-tech, communications and pharmaceutical companies such as IBM Corp, QWEST, and Roche. The district's population is growing modestly, reflecting the nearly full development of its tax base. Wealth levels in the district are notably higher than state and national averages. As the state's largest school district, the district currently serves over 28,000 students. The high cost of housing and open space requirements within the district has resulted in flat total enrollment growth. Furthermore, growing charter school enrollment has reduced the district's own enrollment base although conservative budgeting on the part of the district precludes this as a credit negative.

The district's finances have improved notably since general fund reserves were depleted in fiscal 2002 due to lower than budgeted enrollment growth, which reduced total program funding. Subsequently, the district posted positive operating results annually with the aid of a voter approved levy override in 2002 and improved financial management practices, which included conservative enrollment projections, a balanced budget requirement, and budget development on a generally accepted accounting principles (GAAP) basis. The district's fiscal 2006 undesignated fund balance now totals $17 million or almost 8% of spending. Inclusion of the 3% reserve required by the tax payer bill of rights (commonly referred to as TABOR) increases available reserves to almost $23 million or 11% of spending. The fiscal 2007 budget is balanced, based on continued modest enrollment declines.

The current offering represents the first installment of a $296 million bond authorization approved by nearly 60% of voters in November 2006. Primarily for renovation and improvements of the district's aging schools, the scope of the bond program was based on an educational facilities master plan completed in May 2006. The tax levy is projected to be very modest given the district's wealthy tax base. Including the current offering, the district's debt burden remains moderate. The district's formerly very rapid principal pay out rate is now closer to average at 56% in 10 years.

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