OREANDA-NEWS. Fitch Ratings has affirmed the following Perrysburg Exempted Village School District, OH (the district) unlimited tax general obligation (ULTGO) bonds:

--\$1.45 million series 2003 advance refunding unlimited tax bonds, at 'A+';
--\$8.5 million series 2006 advance refunding unlimited tax bonds, at 'A+';
--\$8.6 million series 2007 advance refunding unlimited tax bonds, at 'A+'.

The Rating Outlook is revised to Positive from Stable.

SECURITY

ULTGO bonds are payable from a voter-approved debt service millage, outside general operating millage, that is adjusted to yield sufficient revenue to pay debt service payments.

KEY RATING DRIVERS

IMPROVED FINANCIAL PERFORMANCE AND RESERVES: The Positive Outlook reflects a substantial increase in the district's operating revenue base and the resultant increase in cash and reserves, beyond Fitch's previous expectations. Tight expenditure controls while addressing enrollment growth operating and capital cost pressures have also supported the increase in cushion, better positioning the district for uncertainty.

REVENUE CONSTRAINTS: The district's revenue structure requires regular voter renewal of a portion of existing revenues but has benefitted from a long track record of support. Operating and capital expenditure needs will necessitate future levy renewals without which may challenge the district's ability to maintain sound reserves.

STABILIZING, DIVERSE TAX BASE: The outlook for district assessed valuation (AV) is modestly positive given current and continuing construction and development activity.

ABOVE AVERAGE ECONOMIC PROFILE: The district benefits from above average wealth and income levels with above average population growth and below average county unemployment rates.

MODERATE, LONG TERM LIABILITIES: Overall debt is expected to remain moderate. Below-average amortization, including a recent issuance that will fund district facility capital improvements to meet current and future enrollment growth, helps keep debt service costs low. Pensions costs are currently manageable but could rise depending on how the state manages future payments to the underfunded system. Additional debt issuances are not expected in the near term.

RATING SENSITIVITIES

ROBUST CUSHION: The rating could move into the 'AA' category over the near term if the district continues to demonstrate maintenance of robust reserves while managing enrollment growth.

VOTER APPROVAL: The rating could be downgraded if the district fails to receive voter approval for operating levy renewals, absent offsetting measures. Fitch believes spending cuts needed to offset potential revenue losses from failed renewals would be quite challenging given that renewals levies total 22% of revenues.

CREDIT PROFILE

Perrysburg Exempted Village School District is located in northwest Ohio in Wood County and is a part of the Toledo metropolitan area. District population growth over the past decade has been above average, increasing 15.8% since 2000 to 27,731 in 2014, in part reflecting the desirability of the community and the schools.

ABOVE AVERAGE ECONOMIC PROFILE:
The local economy is becoming more diverse as the auto manufacturing services sector becomes a smaller component of the employment and tax base while health care and education continue to grow. Local employers include Owens Illinois World Headquarters and a number of other manufacturing companies. The community is located within close proximity to Bowling Green State University, The University of Toledo and Owens Community College. Unemployment for 2014 in Wood County averaged 5.1%, below both state and national averages. District wealth and income levels are significantly higher than county, state and national levels. Fitch expects the underlying economy to remain stable with above average performance.

STABILIZING AV:
AV within the district has grown modestly in each year since fiscal 2008 after suffering a steep 8% decline in 2011 following revaluation. AV growth was a modest 5.9% growth over 2012-2014. Given continued construction activity within the district, the outlook for AV is modest growth, which should stabilize district property tax revenues. The tax base is not concentrated; top 10 taxpayers make up approximately 4.8% of total AV.

VARIED FINANCIAL PERFORMANCE AND IMPROVED RESERVES
District finances are heavily dependent on property taxes which comprise a large percent (over 55%) of the district's annual general fund budget while state funds comprise only 25%. Roughly \$11 million, or 22% of fiscal 2014 general fund revenues, are subject to voter renewal every four years following a fiscal 2013 voter-approved increase in the operating levy.

Perrysburg's previously strained financial position can be attributed to management's inability or decision not to raise revenues or cut expenditures at the level required to maintain reserves. Fitch's downgrade to 'A+' in 2011 reflected the district's unrestricted general fund balance which had eroded to zero by end of fiscal year 2012. Successful levies and tight expenditure controls since, positioned the district to record sizable operating surpluses (after transfers) in fiscals 2013 and 2014. Unrestricted fund balance increased to a sound \$7.3 million or 16.7% of general fund budget at fiscal year-end 2014.

The district's five year financial forecast projects additional smaller surpluses in fiscal 2015 and 2016 but deficit operations for the fiscal 2017 budget, absent voter renewal of levies. Under the governors proposed 2016-2017 biennium budget the district expects funding to remain flat to modestly positive based on continued enrollment growth. The Positive Outlook reflects that Fitch would likely upgrade the rating to 'AA-' upon successful levy renewals in 2015 and 2016 and continued cost management to maintain a robust cushion to protect against uncertainty.

The district appears to be effectively managing academic performance in the context of enrollment growth and reserve building, maintaining an academic designation of 'Excellent' from the state and most recently received very high grades on the state's local report card summary. Fitch believes the natural growth in expenditures, given limited cost cutting ability, will make this balance increasingly challenging over the long-term without occasional revenue infusion.

MANAGEABLE LONG TERM LIABILITIES
The district's debt burden is moderate at \$2,381 per capita and 2.96% of market value and includes \$38.9 million ULTGO bonds issued in March 2015 to address enrollment growth and capacity needs. A below average amortization rate of 39% retired in 10 years will moderate the budgetary impact of the newly issued debt.

The district contributes to the School Employees Retirement System (SERS) and the State Teachers Retirement System (STRS) to fund both pension and other post-employment benefits (OPEB). Both SERS and STRS are cost-sharing, multiple-employer defined benefit plans with a poor funded ratio of 61%. The district regularly contributes 100% of state-required payments but contributions are not actuarially determined. State-wide system contributions total roughly 50% of the actuarial required contribution, putting pressure on the system long term. Carrying costs for debt service, pensions and OPEB are moderate at 12.1% of total governmental expenditures but could rise depending on state-wide pension solutions.