OREANDA-NEWS. Fitch Ratings has affirmed its 'AA+' rating on the following Poudre School District R-1, Colorado (the district) unlimited tax bonds:

--\$41.1 million general obligation (GO) bonds outstanding, series 2004B, 2006, and 2008.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from an unlimited ad valorem tax pledge of the district. The bonds are secured further by the Colorado School Credit Enhancement Program, which is rated 'AA' by Fitch.

KEY RATING DRIVERS

SOUND FINANCIAL FLEXIBILITY: The district's financial profile is positive, characterized by structural balance and solid reserves despite some use of cash for capital projects.

STABLE AND DIVERSE ECONOMY: The local economic climate is favorable and continues to demonstrate low unemployment, average wealth levels, and a healthy local housing market. Enrollment growth is modest and manageable in relation to the district's capital needs.

LOW DEBT BURDEN: The district's practice to cash-fund capital needs has resulted in a very positive debt profile as evidenced by a modest debt burden, rapid principal amortization, and affordable future debt plans.

RATING SENSITIVITIES

SHIFT IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics including the district's sound financial management practices. The district's history of maintaining solid reserves while addressing operating and capital needs supports expectations for rating stability.

CREDIT PROFILE

The district is located 65 miles north of Denver and includes the city of Fort Collins and the towns of Timnath and Wellington within its very large 1,856 square mile boundary. The district serves a population of approximately 194,728 residents and is the home of Colorado State University.

The district serves approximately 28,500 students, operates 50 schools and is one of the state's largest school districts by geographical size. Annual enrollment growth has been steady but modest over the past decade at around 1.5% and there are a limited number of charter schools.

STABLE ECONOMIC FOUNDATION

The local economy is anchored by Colorado State University with about 25,000 on-campus students. Private employers include high-tech, health care, and companies such as Hewlett-Packard, Agilent, Intel, Banner Health Systems, and Anheuser-Busch. The unemployment rate in Larimer County (the county) has trended downward after spiking in 2009 and 2010. The county's December 2014 rate of 3.1% was below the state (4%) and national averages (5.4%). Income levels are comparable to the state and nation.

Taxable assessed value (TAV) has stabilized after a modest 4.4% contraction in fiscal 2012 when the county assessor worked through a multi-year appraisal/review process. Growth in TAV has averaged roughly 2% annually since 2012 and the district projects similar, modest expansion going forward, focused on development in the northeast along I-25.

STRONG FINANCIAL PERFORMANCE

The district's financial position is robust, marked by a history of positive operating results achieved through conservative budgeting practices and prudent cost controls. The district also benefits from voter support for operating tax levy overrides. The most recent annual override was approved in November 2010 for \$16 million (7% of revenues).

Audited results for fiscal 2014 were positive with a year-end \$1.8 million addition to fund balance despite the use of operating revenues for one-time technology purchases. Unrestricted general fund balances were a high \$42 million at year-end, or 19% of spending.

The 2015 adopted budget shows a 5.4% increase from the previous year's audit, driven by increasing state per pupil funding and new student growth of 2.3%. The 2015 budget also includes additional staff with assistant principals added at each of the 30 elementary schools to assist with teacher evaluations as required by Senate Bill 10-191. The district estimates this added expense at \$1.4 million annually. Management reports that year-to-date results are substantially in line with the balanced budget.

LOW DEBT BURDEN, LOW PENSION FUNDING LEVELS

The district's overall debt burden remains modest at \$1,024 per capita and 0.9% of market value, attributable to the district's largely cash-funded capital program. Debt amortization is rapid, with 75% of principal retiring in 10 years.

The district maintains \$30 million in bond authorization that it may issue later this summer for various maintenance projects. Additional authorization may also be sought as early as 2016 after district officials finish updating the comprehensive facilities master plan that will outline long-term capital needs. The district's low debt burden and rapid amortization are credit positives and underscore its ability to take on additional debt.

Pension and other-post employment benefit (OPEB) benefits are provided through the district's participation in the School Division Trust Fund administered by the Public Employee Retirement Association of Colorado (PERA), a cost-sharing multiple employer plan. The district's annual pension payments are statutorily determined. The school division's pension funded ratio is low at 57% based on the Fitch-adjusted 7% investment rate of return. Carrying costs related to long-term debt, pension and OPEB liabilities are manageable at 19% of governmental fund spending but would be larger if the statutory payment was actuarially based.