S&P Rates Fremont Union HS District, CA GO Bonds 'AA'.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 6/23/98-- Standard & Poor's today assigned its double-'A' rating to Fremont Union High School District, Calif.'s G.O. bonds (Election of 1998) series A dated July 1, 1998 due Sept. 1, 2022. The bonds are scheduled to sell June 25, 1998.

The rating reflects: -- A strong and rapidly expanding economy in the Silicon Valley area; -- Above-average wealth and income levels; -- Strong fiscal management; and -- Low, but increasing debt levels.

The district (estimated population 250,000) is located in the heart of Silicon Valley in Santa Clara County and serves all of Cupertino, most of Sunnyvale, and portions of San Jose, Los Altos, Saratoga, and Santa Clara. Voters of the district authorized a $144 million bond measure in April 1998 with proceeds to be used towards the modernization of the district's facilities. The issue serves as the first of four large bond series to be issued on alternate years through 2004 and six smaller issues will be issued through 2020.

Located in the heart of Silicon Valley, the district operates four high schools (grades 9-12) for an enrollment of 8,505. The district's economy is driven by the high-technology industry and is recognized as one of the fastest growing areas of the country. Leading employers in the area include Lockheed Martin, Hewlett-Packard Manufacturing Applications Group, Apple Computers, and Advanced Micro Devices. The district has a diverse tax base with the 10 leading employers comprising 12.7% of total assessed valuation (AV). AV increased a healthy 6.6% in the last year for a total of $19.6 billion, or $78,670 per capita. Median household income is very high at $67,044 or 190% of the state average and 197% of the national average. Unemployment for the district is a mere 1.87%.

The district has benefited from being a "basic aid" district (since 1989-1990), collecting more from its property tax base than it would under the state funding formula. The district ended fiscal 1997 in break-even position with an unreserved general fund balance of $6.2 million, or 14.0% of expenditures. For fiscal 1998, the district expects a small operating surplus and an unchanged unreserved general fund position from fiscal 1997. The district maintains the majority of its reserves (including the 3% special reserves required by the state, retiree benefits, and self-insurance) in a special reserves fund outside of the general fund.

The special reserves fund has averaged 11.3% during the last four fiscal years. Notably, the district began to set aside money in the special reserves fund for retiree benefits beginning in fiscal 1995-1996 with the benefits fully funded. In addition, the district places the entire state lottery revenues amount in the special reserves fund. The district will receive approximately $2.1 million in additional revenue from developer fees and leasing out vacated district property. Labor relations have been strong and the district has provided manageable cost-of-living adjustments to employees by linking compensation directly to property tax revenues.

Overall net debt for the district is manageable at $389 million or $1,558 per capita. The tax rate promised to voters is approximately $25 per $100,000 AV with an assumed tax base growth of 8% for 1998-1999 and 4% annually thereafter.

OUTLOOK: STABLE The outlook for the district is based upon increasing assessed valuation and strong financial management, Standard & Poor's said. ---CreditWire

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