2008-08-22 00:36:04 -

- Fitch Ratings assigns its 'AA' rating to $42.9 million of Poudre School District No. R-1 (the district), CO's general obligation (GO) refunding bonds, series 2008, scheduled to sell via negotiation during the week of August 25th. The Colorado School Credit Enhancement Program (rated 'AA-' by Fitch) also supports the bonds. Additionally, Fitch affirms its 'AA' rating on the district's

$224.9 million outstanding GO bonds. The Rating Outlook is Stable.

The bonds are direct obligations of the district and are payable from an unlimited property tax levy. Bond proceeds will be used to refund outstanding debt for interest cost savings and to pay costs of issuance.

The 'AA' rating reflects the district's modest debt levels and rapid principal amortization, strong financial position, and healthy tax base growth. Notably, the district has posted steady annual operating results despite a stagnant enrollment base which only recently has started to grow again due to changing demographics in different parts of the district. The district has benefited from consistent voter support for both operational and capital needs. Continued conservative budgeting of the district's annual enrollment will be key to maintaining structural balance within the district's finances.

Located 65 miles north of Denver, the district includes the cities of Ft. Collins and the towns of Timnath and Wellington within its very large 1,856 square mile boundary. The local economy is anchored by Colorado State University with a current enrollment of about 24,700. Private employers include high-tech, imaging, and beverage companies such as Hewlett Packard, Agilent, Eastman Kodak, and Anheuser-Busch. Wealth levels in the district are notably higher than state and national averages. As one of the state's largest school districts, by geographical size, the district currently serves nearly 24,000 students. Population growth is notable in the Towns of Timnath and Wellington. Due to strong academic performance, the district is home to a limited number of charter schools. Transfer students from surrounding districts further add to the district's non-charter school enrollment base.

The local property tax base has grown by a solid compound annual average of 5.2% over the last five years. Anheuser-Busch (senior unsecured notes rated 'A' with a Negative Outlook) is the district's largest taxpayer, accounting for over 4% of total assessed value. The county's unemployment rate had been low through 2000, on par with the state average, but it has started to trend up moderately, totaling 4.7% in June 2008.

The district's debt profile is positive, characterized by a low overall debt burden of under $1,400 per capita and 1.25% of market value. The principal pay out rate is rapid with 74% of debt retired in 10 years. The district's last bond authorization, totaling $175 million, was approved by voters in November 2000, all of which has been issued. A recently completed master facilities plan identified a manageable $112 million in renovations and repairs and will serve as the basis for a planned bond election in 2010 along with a $10 million operations and maintenance levy override election for technology needs.

The district's financial performance remains solid as evidenced by positive general fund operating results in each of the last seven fiscal years. Fiscal 2007 added $1.7 million to the district's reserves, resulting in a cushion of $21.9 million or 13% of spending. Fiscal 2008 is projected to result in break-even operations. The fiscal 2009 budget is balanced and includes additional staff for one new elementary school. The budget projects district enrollment to increase by a modest 1%. Notably, the district has not participated in the state's note program for cash-flow needs in the last five fiscal years, as its own liquidity has been sufficient.

Note: Fitch issued an exposure draft on July 31 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see the Fitch Research 'Exposure Draft: Reassessment of the Municipal Ratings Framework').

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings
Jose Acosta, +1-512-215-3726 (Austin)
Rebecca Moses, +1-512-215-3739 (Austin)
Cindy Stoller, +1-212-908-0526
(Media Relations, New York)