Fitch Ratings said it has upgraded the Okaloosa County School Board, Fla.'s implied general obligation rating to AA-plus from AA; its $2.8 million refunding and revenue bonds, series 2011 (state sales tax revenue bonds) to AA-plus from AA; and $63.4 million certificates of participation (COPs), series 2003, 2006 and 2007 to AA from AA-minus.

The rating outlook is stable for the implied GO and COPs. The rating outlook is negative for the revenue bonds.

The revenue bonds are secured by an annual distribution of sales tax pursuant to Florida statutes section 212.20(6)(d).a. The annual distribution is equal to debt service obligations.

The COPs are payable from lease payments made by the district and are subject to annual appropriation of the school board under a master lease purchase agreement.

The district is required to appropriate funds for all outstanding leases on an all or none basis. In the event of a non-appropriation, the district must surrender possession of all leased facilities under the master lease to the trustee for disposition by sale or re-letting of its interest in the facilities.

The upgrade of the implied GO to AA-plus reflects the district's strengthened financials, improved economic environment, and very low debt levels. Fitch expects debt levels to remain modest given the district's manageable capital needs.

The upgrade on the revenue bonds reflect their cap at the lower of the school district implied GO (one notch below the state's GO rating). At this time, one notch below the state's GO rating of AAA with a negative outlook is the lower of the two options.

The one-notch rating difference between the district's implied GO and the COPs recognizes the non-appropriation risk inherent in the COPs structure. Master lease provisions including "all or none" appropriation requirement, a leasehold interest on a significant number of essential schools, and reliance upon COPs financing serve to mitigate the potential for non-appropriation.

Overall debt levels are affordable while capital needs appear manageable. Amortization of outstanding principal is rapid.

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