Fitch Rates Palm Beach County School's $330MM COPs `A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 5, 2001

Fitch has assigned its 'A+' underlying rating to the School Board of Palm Beach County, Florida's (the district) $160 million series 2001A and $170.5 million series 2001B certificates of participation. The certificates are scheduled to sell Feb. 12 through a syndicate led by Salomon Smith Barney. The certificates are expected to be insured by Ambac Assurance Corp., whose insurer financial strength is rated 'AAA' by Fitch. Fitch has also affirmed its 'AA-' rating on the district's $190 million outstanding general obligation bonds and its 'A+' rating on the district's $195 million outstanding certificates of participation.

The underlying 'A+' ratings reflect Palm Beach County school board's stabilized financial management in recent years and the low burden of debt on Palm Beach County's vast, growing tax base. The board stepped up its fiscal discipline several years ago with the establishment of a contingency fund, although operating pressures and state funding reductions have so far prevented the board from reaching its 3% goal. Tight budgetary balance and susceptibility to state funding declines are mitigated by sound multi-year planning and continued focus on controlling expenditure increases.

Future challenges to keep up with growth while reducing class sizes and the use of portable classroom facilities continue to demand the district's attention. Medium-range planning for land and capital facility needs appears superb, and pursuant to 1998 legislation, the board is pursuing efforts with other governments to better consider school needs when planning for development. The district's most recent $2.1 billion five-year capital plan, which focuses on accommodating a larger number of students in permanent facilities, has identified funding shortfalls for 13% of its fiscal 2001-2005 capital needs, a significant reduction from last year's five year plan. Options for fully funding identified capital improvements include issuing $259 million additional COPs between 2003-2005, seeking voter approval for new GO issuance, or levying a sales tax for school purposes. Currently, the overall debt burden equals 2.2% of property value.

The district ended fiscal 2000 with a $2 million reduction in general fund balance. The slight operating deficit was caused by a $10 million reduction in state funding of the excellent student education program, as well as increased expenditures related to newly renewed employee health care contracts. The district adjusted its budget accordingly by implementing hiring freezes and other cost reductions to offset revenue losses. The district anticipates similar operating results in fiscal 2001 due in part to an approximate $2 million reduction in state funding, although the school board remains committed to increasing contingency reserves with a budgeted $9 million increase in fiscal 2001. The unreserved general fund balance and the reserve for board contingency, totaling $34.6 million at the end of fiscal 2000, represented 4.1% of expenditures and transfers.

Palm Beach County's (the county) large, diverse economy is a major factor in both the school district and county's bond ratings. Fitch rates the separate county government's GOs 'AAA'. With its warm climate and coastal location, the county traditionally has been a top tourist and retiree destination. This has helped the West Palm Beach metropolitan area rise to trail only San Francisco and suburban Connecticut as the nation's third most affluent. In addition to its aerospace, communications and professional sectors, the county is Florida's largest agricultural producer, with $2 billion in sugar cane and other production.