FITCH RATES BROWARD COUNTY SCHOOL BD LEASING …

FITCH RATES BROWARD COUNTY SCHOOL BD LEASING CORP., FL COPS 'A+'; OUTLOOK STABLE

Fitch Ratings-Tampa-11 November 2010: Fitch Ratings assigns an 'A+' rating to the following Broward County School Leasing Corp., Florida's (the district) bonds:

--$279.7 million certificates of participation (COPs), series 2010-B.

The COPs are expected to sell via negotiation on or after Nov. 15. Proceeds will be used to refund outstanding certificates for savings. Debt service savings is expected to be relatively level and there are no maturity extensions.

In addition, Fitch affirms the following:

--$2 billion (inclusive of COPs to be refunded) in outstanding COPS at 'A+'; --Implied general obligation (GO) rating at 'AA-'.

The Rating Outlook is Stable.

RATING RATIONALE:

--The rating for the COPS reflects appropriation-risk which is largely offset by strong legal features of the master lease provision, which requires an all-or-nothing appropriation. In the event of non-appropriation, the district would relinquish the rights to all facilities included under the lease.

--Financial flexibility is adequate, supported by narrow reserves. Operating performance appears to be stabilizing, attributable largely to board support for a temporary additional operating levy and expenditure controls.

--The capital outlay millage required to service the district's outstanding COPs is well above average, and further declines in district taxable assessed value (TAV) will reduce revenues available for pay-go funding of capital as well as capital maintenance.

--The ratings incorporate the district's low debt levels as well as the broad and diverse economy.

KEY RATING DRIVER:

The district's margins are narrow and reductions of reserves in recent years reduced flexibility to a level that can tolerate little volatility. Recent and anticipated TAV reductions, coupled with the state's shift of district-generated capital funds to operations results in a constrained level of revenue to service COPs debt service and fund ongoing capital needs.

SECURITY: The COPS are secured by undivided proportionate interest in lease payments made, subject to appropriation by the Broward County School Board, to the issuer under a master lease purchase agreement.

CREDIT SUMMARY: While the district may use any legally available revenue for COPS debt service, the district has historically allocated revenue for this purpose from its capital outlay millage. Florida school districts have traditionally been permitted by the state to levy 2 mills for capital outlay, with three-quarters of the levy allowed to be used for COPS debt service. Over the past few years, the state has lowered this levy to its current level of 1.5 mills for fiscal 2010. As part of the legislation, a waiver was implemented on the limit on use of proceeds for COPS debt service. Due to recent

declines in AV and including a 12.5% reduction in fiscal year (FY) 2011 which was anticipated at the time of the last rating, the millage used for maximum annual debt service (MADS) on the district's debt has increased to a high 1.220 mills. Incorporating revenue from Build America Bonds (BABS) and qualified school construction bonds QSCB subsidies, it falls to 1.187 mills. The district anticipates a less severe 3.5% TAV decline for FY 2012, which would slightly increase the millage required to cover MADs and reduce revenue available for other capital related purposes.

Financial results for the district have been somewhat volatile with structural imbalances contributing to moderate operating deficits in four of the last five audited years, driven partially by mid-year state funding reductions. Fiscal 2009 results show that a budget gap of over $100 million, including $35.6 million in state funding holdbacks, was offset by a combination of expenditure reductions, use of fund balance for recurring expenditures, and a large transfer from the internal service fund. Unreserved fund balance declined to $77.6 million, equal to 3.7% of spending. On an unaudited basis for FY 2010, the district reports its unreserved fund balance is down $17.9 million due largely to budget variances in state revenues and unemployment compensation. The unreserved fund balance continues to provide financial flexibility appropriate for the rating and is above the district's 3% policy floor. The district was pressed to address a $100 million budget gap for FY 2011 and adopted a structurally balanced budget by approving a one-year .25 mill critical needs levy for operations, reducing department and school budgets, and utilizing non-recurring federal funding. District officials report that the majority of solutions for FY 2011 would be recurring and expect to reduce instructional staff in future years to address future budgetary gaps. The district expects to end the fiscal year with no use of unreserved balance although the budget assumes no salary increases for employees and negotiations for FY 2011 are just underway. Overall debt for the district remains low relative to the vast county taxbase and population, as the district financed a significant portion of capital projects through pay-go revenues in prior years. The district states that capital needs are limited to general maintenance due to the high level of building and renovations completed in the past few years. The current fiscal 2011-2015 capital improvement plan (CIP) totals a sizeable $1.3 billion, although slightly more than $1 billion represents COPs repayment with approximately $300 million required for new projects.

Broward County, which is coterminous with the school district, is situated on Florida's Atlantic coast between Miami-Dade and Palm Beach counties. Broward ranks as Florida's second most populous county, with an estimated 1.76 million residents in 2009, contributing to the school district's status as second largest in the state and sixth in the nation. The county is home to 31 incorporated municipalities including Fort Lauderdale, Coral Springs, and Hollywood. Fort Lauderdale-Hollywood International Airport and Port Everglades are each located within the county. Significant cruise terminal investments at Port Everglades have helped lock-in long-term cruise passenger commitments expected to generate higher annual passenger throughput. The housing market and general economic contraction remain key, affected, however, by the economic downturn. Foreclosure and delinquency rates have risen year-over-year and are each higher than the state average, and current property tax collections are down slightly but within budget for FY 2010. Unemployment stands at 10.7% as of August 2010, higher than August 2009 but below state and regional monthly averages.

Contact:

Primary Analyst Kelly McGary Senior Director +1-813-224-0492 100 N Tampa St Suite 2675 Tampa, FL 33602

Secondary Analyst Barbara Rosenberg Director +1-212-908-0731

Committee Chairperson Ann Flynn Senior Director +1-212.908.9152

Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526, Email: cindy.stoller@.

Additional information is available at ''

In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc., IHS Global Insight.

Applicable Criteria and Related Research: --'Tax-Supported Rating Criteria', dated 16 Aug. 2010. --'U.S. Local Government Tax-Supported Rating Criteria', dated 08 Oct. 2010.

For information on Build America Bonds, visit BABs.

Applicable Criteria and Related Research: Tax-Supported Rating Criteria U.S. Local Government Tax-Supported Rating Criteria

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