Fitch Rates Fullerton Joint Union High SD, California GOs 'AA'; Stable Outlook.

SAN FRANCISCO -- Fitch Ratings assigns an 'AA' rating to the Fullerton Joint Union High School District, California (the district) $30,000,000 general obligation (GO) bonds, 2002 election, series B. The bonds are scheduled to sell via negotiation through George K. Baum & Co. during the week of Feb. 25. Proceeds of the bonds will be used to renovate and construct various school facilities within the district and to pay issuance costs. The Rating Outlook is Stable.

The 'AA' rating on the bonds and Stable Rating Outlook reflect the district's solid financial condition, sound management practices, low debt burden, and diverse economic base. Consistently healthy unreserved general fund balances provide the district with significant financial flexibility. In addition, the district maintains a sizeable cash position. The district's conservative approach to capital borrowings and use of alternative funding mechanisms have resulted in low debt ratios and have positioned the district well for financing the renovation and construction projects approved by district voters in March 2002.

The district is located in northwestern Orange County, 22 miles southeast of the City of Los Angeles. The district serves primarily the cities of Fullerton, La Habra, and Buena Park along with several neighboring communities and portions of unincorporated Los Angeles and Orange Counties. Accounting for 43% of district student enrollment, Fullerton is the District's largest city and provides a strong economic base. Major employers in Fullerton include California State University at Fullerton, St. Jude Medical Center, and the District. Population in both the city and Orange County has grown steadily over the past decade: Fullerton's population has increased by more than 18% since 1990 to approximately 134,000, and Orange County has seen its population grow 25% to 3 million currently. Population growth has supported steady increases in employment levels, and the unemployment rate has been consistently below county and state levels since 1995.

The district's tax base has also experienced steady growth in recent years. Assessed valuation (AV) in the district has increased at an above-average rate of 6.1% annually since 1999, to $19.6 billion in 2004. New building construction in the district is primarily residential, with 74% of 2004 building permits for residential construction contributing to the stability of the tax base. The top-10 taxpayers comprised 3.4% of total 2004 AV, indicating low taxpayer concentration.

The district's financial position is strong, with flexibility derived from good management, ample reserves, and cash balances, and steady but manageable enrollment growth. The fiscal 2004 general fund balance remains solid at $14.4 million, or 12.7% of expenditures and transfers out, although it decreased 11% from fiscal 2003 levels. The unreserved general fund balance for fiscal 2004 totaled a healthy $7.3 million, or 6.4% of expenditures and transfers out, and has averaged a sound 8.9% over the past three fiscal years. In addition, the district maintains a prudent 'Focus on the Future' special reserve fund that had an ending balance of $10.8 million in fiscal 2004, providing additional ample financial flexibility. The district's debt burden is low with direct debt at $282 per capita and 0.36% of AV, while overall debt is $1,605 per capita and 2% of AV. The series B bonds represent the second and final installment of a $67.9 million GO authorization approved by 60% of voters in a March 2002 special election under California's Proposition 39. The district does not plan to seek authorization to issue additional GO bonds in the foreseeable future.