Fitch Rts Parma City School District, OH's $12MM COPs 'A+'.

CHICAGO -- Fitch assigns an 'A+' rating to Parma City School District (the district), Ohio's $12,595,000 certificates of participation (COPs), series 2006. The COPs are scheduled to sell on a negotiated basis on or about June 7, 2006 through A.G. Edwards & Sons, Inc. Proceeds will finance the relocation of administrative and maintenance offices and the renovation of existing classroom space. The COPs are secured solely by lease payments from the district, which are subject to annual appropriation. In the trust agreement, the Parma CSD leasing corporation has pledged to the trustee, Huntington National Bank, rental revenues and other revenues within the certificate fund, the ground lease, the lease, and the leased property. Fitch also affirms the 'AA-' rating on the district's outstanding $1 million limited tax general obligation (GO) bonds and $30 million special obligation tax anticipation notes. The Outlook is Positive.

The 'A+' COP rating reflects a sound lease structure in addition to the school district's strong fiscal management, diversifying economic base, and low debt burden. The Positive Outlook reflects improved financial performance achieved despite the periodic need to seek additional voter-approved levies, strong internal funding of the capital program, and reduced reliance on debt given capital levy passage.

For the second consecutive year, in 2004-2005 the district achieved an 'effective' designation on its state school report card, the second highest achievement level in the state scoring system, from 'continuous improvement', the third highest ranking, just two years prior. Improved academic performance, coupled with new financial management and a renewed focus on teacher training and curricula development, enabled the district to pass a dual-purpose 5.9 mill levy in May 2005 to finance both general operating costs and capital improvements, providing increased financial flexibility.

Although the district must return to voters in the next several fiscal years for renewal of its emergency levies, strong fiscal management has reduced the frequency of current expense levies.

Located eight miles southwest of downtown Cleveland and within Cuyahoga County (rated 'AAA' by Fitch), the district encompasses the cities of Parma (GO debt rated 'AA-' by Fitch), Parma Heights, and Seven Hills. The district is the 10th largest Ohio school district in terms of enrollment, with a 2005-2006 enrollment of 13,141. Enrollment growth has stabilized, remaining essentially flat in the past five years.

Steady growth in economic development has produced a 3.1% annual gain in the property tax base since 1994. The district is primarily residential with a notable manufacturing sector. General Motors Corp. is the district's largest employer (3,000 employees), as well as the largest taxpayer (1.9% of assessed valuation). However, the service sector has grown at a faster pace and is relatively larger (based on the county's figures), employing 41% of the population compared to 14% for manufacturing. Four out of the top five employers are in education and health care. The district's per capita income levels approximate state and national averages.

In fiscal 2005 (June 30 year-end), the district's total general fund balance improved to $20.2 million, or 17.5% of spending, from a negative $308,000 (negative 0.4%) in 1999. While steady revenue growth of 4.6% annually in that period helped rebuild fund balance, management also restrained spending by reducing positions primarily through attrition. Voter-approved property tax levies facilitated progressively improving fiscal performance: passage of the most recent current expense levy in May 2005 will provide ample financial flexibility for the next several years before the need to seek additional levies.

The district's consistent use of internal resources to fund capital projects and stable enrollment has led to a low direct debt burden equal to $481 per capita and 0.8% of full market value. Issuance by overlapping entities brings the overall debt level to a modest $1,164 per capita and 2% of full market value.

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