Fitch Rates Columbus City School District, Ohio's $60MM RANs 'F1+'.

CHICAGO -- Fitch Ratings has assigned an 'F1+' rating to the Columbus City School District, Ohio's $60,000,000 current revenue anticipation notes, series 2004, which will sell competitively on Dec. 7. Fitch also affirms the 'AA' long-term rating on $412 million of outstanding debt. The Rating Outlook is Stable.

The notes, which are not subject to early redemption, will pay interest at maturity on March 15, 2005. Proceeds will finance district cash flow needs in fiscal 2005 (June 30 year-end) in anticipation of remaining current property taxes. Debt service coverage of the notes should approximate 2.24 times (x).

The 'AA' rating is based on the district's growing and diverse economic base, improved management practices which will increase operating efficiency, and an affordable debt burden. The Columbus Board of Education has committed additional human and financial resources to increase academic performance; it has improved financial accountability and efficiency and created a capital facilities plan that complements educational reforms.

Although student academic performance has improved in the last few years, the administration faces the challenge of maintaining strong community support as it initiates a comprehensive upgrade of its facilities. The strong tax base, combined with increased state aid support, has improved the district's financial performance and liquidity. Debt levels are moderate and increased borrowings will not outpace the district's capacity to meet debt service.

The Columbus City School District's (the district) capital program will modernize its facilities and expand its academic potential, but its size will require a measured pace of debt issuance. Both the growing economy and sizable state support will offer financial resources to meet the costs of such an undertaking, but continued academic progress is key to securing voter support for additional debt. The administration has increased the number of academic programs to address deficiencies and implemented stronger financial controls to develop more budgeting flexibility. Labor contracts with administrative staff expired February 2004 and will expire for teaching staff December 2004, but labor relations are in fine condition. As the district anticipates weaker economic conditions, continued strong budgetary control will be necessary. Voter passage of a 6.95 mill operating levy in the November 2004, which will generate about $63 million of new tax revenues annually, will be important to the district's continued financial success.

With a population of 544,951, the district serves most of Columbus, the capital of Ohio. Having a tax base that has grown 4.2% annually in the last decade, the district experienced limited economic volatility due to a diverse mix of industry and government. Per capita income of Columbus residents approximates the state and national averages. The unemployment rate in Columbus equaled 5.7% in September 2004, compared with 5.7% for the state and 5.4% for the nation.

The district's general fund, after implementing Government Accounting Standards Board (GASB) 34 standards in fiscal 2002, produced shortfalls in the last two fiscal years, which lowered the general fund ending balance to $5.5 million (0.9% of expenditures) in fiscal 2003, from $81.9 million (15.9%) in fiscal 2001. Although increased state revenue support has complemented the expanding local property tax base, voter approval of additional property tax levies has been necessary to bolster financial performance in the current year. Under the Ohio school finance system, districts must usually reduce their reserves until voters approve the renewal of property tax operating levies. Systemic changes to budgetary management and purchasing in the Columbus district have increased financial flexibility and lengthened the period between voter-approved operating levies. Since 1986, voters have approved six of the last seven initiatives.

District voters authorized $391.9 million of borrowing in November 2002 to meet the first two segments of the seven-segment capital program. Construction of 15 new buildings begins in calendar 2005. Totaling $1.3 billion, the plan anticipates state support for 30% ($394.8 million). The remaining $551.0 million of additional authorization necessary to complete the capital program will depend on taxpayer satisfaction with the district's academic achievements, the pace of construction, and the financial capacity to absorb additional financing charges. The district's direct debt represents $757 on a per capita basis and 1.4% of property market values; overall debt totals $1,231 per capita and 2.3% of property market values. Additional borrowing against the remaining current authorization, assuming no tax base or population growth, would increase the overall debt to $2,118 per capita and 3.8% of property market values.