OREANDA-NEWS. Fitch Ratings affirms and withdraws its rating on the following Fort Bragg Unified School District, CA (the district) bonds:

--\$87,000 unlimited tax general obligation (GO) capital appreciation bonds series 2003 at 'AA-'.

The Rating Outlook is Stable.

SECURITY
The bonds are payable from an unlimited ad valorem tax on all taxable property within the district.

KEY RATING DRIVERS

LIMITED ECONOMY: The district is geographically isolated and the area's economy is limited. Most economic indicators are below state and national averages.

SOUND FINANCIAL POSITION: The district has maintained adequate reserves despite revenue pressures resulting from declining enrollment. Proposed increases in state funding, as well as stabilizing enrollment, appear likely to benefit the district's finances over the next several years.

MANAGEABLE LONG-TERM LIABILITIES: Overall debt levels are moderate and amortization of direct debt is slow. Carrying costs for debt service and retiree benefits are affordable.

WITHDRAWAL FOR COVERAGE REASONS: The rating of the issuer is no longer considered by Fitch to be relevant to the agency's coverage following a 2014 refunding that reduced Fitch-rated debt to de minimis levels.

CREDIT PROFILE
The district encompasses approximately 450 square miles in and around the city of Fort Bragg located on the north coast of California in Mendocino County, approximately 165 miles north of San Francisco. The district serves approximately 1,800 K-12 students.

LIMITED ECONOMY WITH CONTINUED WEAKNESS
The district is isolated from major population centers and continues to face long-term economic challenges following the closure of the local Georgia-Pacific lumber mill in 2002, and the related decline of the regional forest products industry. Tourism has provided some opportunities for economic growth, but population and employment levels have been stagnant in recent years.

Countywide unemployment rates have generally tracked statewide averages and, at 6.6% for 2014, unemployment was well above the national rate of 5.5%. Median household incomes for the district are weak at 68% to 78% of state and national averages.

Taxable assessed valuation (TAV) was relatively unaffected by the national housing boom and subsequent declines have been muted. TAV dropped by 5.3% between 2010 and 2013 before recording 1% increases in 2014 and 2015. December 2015 home values reported by Zillow reflect an 8.9% year-over-year increase, which may support further AV gains in 2016. Tax base concentration is minimal as the top 10 taxpayers account for a low 7% of TAV.

SOUND FINANCIAL POSITION
The district's financial position is sound despite recent revenue pressures. Unrestricted fund balance at the end of fiscal 2014 remained adequate at \$1.8 million, equal to 10.4% of general fund spending, and has declined in line with Fitch's expectations from a 2012 high of 15.8% (\$2.8 million). The spend-down results from the district's efforts to spread expenditure reductions over several years to address enrollment declines, relying on attrition rather than layoffs to reduce costs.

Enrollment levels fell approximately 5% between 2011 and 2014, resulting in proportional declines in per-pupil funding. Management now expects enrollment levels to stabilize over the next several years, which should help to stabilize funding if such projections come to pass. The district will also likely benefit from higher revenue levels under the Local Control Funding Formula and general improvements in state revenue collections over the next several years.

MODERATE DEBT LEVELS; SLOW AMORTIZATION
Overall debt levels for the district are moderate at 3.6% of TAV and \$3,912 per capita. Amortization is slow due to the district's past issuance of 40-year capital appreciation bonds; approximately 28% of outstanding principal will be repaid over the next 10 years. Capital needs are minimal, somewhat offsetting concerns about the slow amortization of the district's debt.

The district participates in two state-sponsored employee pension plans and will face increases in contribution rates over the next several years to address underfunding of liabilities. Carrying costs for debt service and retirement benefits were affordable at 9.7% of governmental expenditures in 2014.