Fitch Rates Clay County School Board, Florida's COPs 'A'; Outlook Stable.
NEW YORK -- In the course of routine surveillance, Fitch Ratings affirms Clay County School Board, Florida's (the district) approximately $15.6 million in certificates of participation (COPs), series 2005A and $17.8 million in COPs, series 2005B at 'A'. The Rating Outlook is Stable.
The 'A' rating on the COPs reflects the strong legal features of the master lease structure as well as the district's general credit characteristics which include adequate financial flexibility, low debt levels and a stable economic base. Also factored into the rating is the above average percentage of students housed in portables which Fitch believes will lead to increased capital needs in the future. The Stable Outlook reflects Fitch's expectation that the district will regain structural balance and retain adequate financial flexibility despite a pressured operating environment.
The COPs are secured by lease payments made by the district to the trustee, as assignee of the Clay County School Board Leasing Corp., which is a not-for-profit corporation created to assist the district in lease-purchase financing. The obligation of the district to make lease payments is limited and payable solely from funds appropriated by the district from available revenues. In the event of non-appropriation, the board must surrender all leased facilities to the trustee.
Clay County is located in northeastern Florida bordering Jacksonville. The county's internal economy is somewhat limited with a historical base in mining and agriculture and recent concentrations in construction and real estate. Benefiting from its proximity to Jacksonville coupled with relatively affordable housing and a significant supply of developable land, the county has experienced substantial population increases in recent years with a roughly 30% increase from 2000 to 2007. Unemployment rates have increased with the recent economic downturn to 9.5% for June 2009 from 5.2% a year prior, but remain below state and national averages.
Financial operations for the district remain adequate for the rating category. After five consecutive years of general fund surpluses, fiscal 2008 ended with a moderate $1.1 million drawdown due to midyear state funding reductions decreasing the unreserved fund balance to 8.4% of spending. For fiscal 2009, the district made a policy decision to lower reserve levels again to mirror more closely the state minimum requirement for school districts of 3% of spending. Estimated actuals show a $15 million deficit which will bring the unreserved fund balance to a still healthy 4.5% of spending. The fiscal 2010 budget is structurally balanced with no use of reserves.
Overall debt levels are low at $811 per person and 1.4% of taxable assessed value (TAV). Based on fiscal 2010 TAV, the district will levy a below average 0.47 mills of the capital outlay millage for COPs repayment which leaves it with ample capital financing flexibility. Near term capital needs are manageable with a capital plan for fiscal 2010-2014 totaling $167.7 million. While the district has no additional debt currently planned, a significant 43% of students are currently housed in portables which Fitch believes will lead to increased capital needs in the medium to long term.