Fitch Rates Mojave USD (California) $8.0MM COPs 'A-'; Outlook Stable.

SAN FRANCISCO -- Fitch Ratings assigns an 'A-' rating to Mojave Unified School District (USD), Kern County, California's $8.0 million certificates of participation (COPs). The bonds are expected to sell via negotiation during the week of May 5, 2008. In addition, Fitch affirms the rating on approximately $28.9 million of Mojave Unified School Facilities Improvement District (SFID) No.1 (CA) outstanding general obligation (GO) debt at 'A'. The Rating Outlooks are Stable. The 'A-' COPs rating reflects strong lease features and the district's overall credit quality.

The district is characterized by solid financial management and flexibility, high fund balance levels, low-to-moderate debt levels, and stabilized enrollment. These strengths are offset somewhat by the district's historically volatile assessed valuation (AV), the area's limited economy, high taxpayer concentration, and relatively isolated location.

The lease includes a covenant to budget and appropriate, a leased asset valued in excess of the COPs, standard insurance, and standard debt service reserve provisions. The district intends to fully or partially refund the COPs with the proceeds of an SFID GO issuance in the next three to five years. However, the SFID will need strong annual AV growth to enable the refinancing within the Proposition 39 tax rate limit.

Mojave USD operates nine schools in eastern Kern County and serves approximately 16,500 residents in California City and unincorporated areas. Enrollment growth has been historically high, but is projected to stabilize moving forward. Enrollment will likely be constrained by the slowdown in California City's housing market, as well as the area's low student to household ratio, owing to the high number of retirees attracted to the city.

The district has been experiencing significant AV gains, averaging 10.5% annually since fiscal 2003. However, this growth follows five years of AV declines in the mid- to late 1990's due to assessment appeals. The fast-growing tax base was caused by the quickly expanding population and new multi-million dollar automotive testing facilities. Taxpayer concentration is above average, with the top three taxpayers representing approximately 11% of AV.

From 2000-2006, California City's population grew rapidly, averaging 7.1% per year. High population growth has been caused by the area's affordable housing compared with surrounding metropolitan areas, the movement towards more Edwards Air Force Base employees living off-base, and increasing economic development. Income levels are higher than the county due to California City's lower agricultural employment and greater exposure to high-wage industries such as defense technology and renewable energies. The city's proximity to Edwards Air Force Base, the county's largest employer, provides additional economic stability, and local mining has reportedly been increasing due to rising commodity prices.

Financial operations are sound, as evidenced by several years of consecutive operating surpluses and strong fund balances. The total fund balance averaged a very high 35.7% of expenditures, transfers out, and other uses during fiscal years 2005-2007. Although the district plans to draw down the fund balance by several million in fiscal 2008 to finance one-time capital expenditures, the budgeted unreserved fund balance is projected to be a healthy $5.2 million (18.1%). Management has prudently identified $2 million in ongoing expenditure cuts to offset the proposed state categorical funding reduction in fiscal 2009.

Certificate proceeds will fund the final construction of libraries, a cafeteria, a gymnasium, a multi-purpose room, a student support services complex, and a sports field at a high school and elementary school. Including the 2008 certificates, the district's overall debt levels are low at $3,026 per capita and 2.8% of taxable market value. Total debt amortization is slow, with approximately 15.4% and 45.0% of debt amortized in five and ten years, respectively.

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