Amend: Fitch Rates Hidalgo County, Texas' $42.1MM Limited Tax COs & Rfdg GOs 'A'.

AUSTIN, Texas -- This is an amendment for a previous message. It amends the sale date for the 2006 bonds and certificates.

Fitch Ratings has assigned an 'A' rating to the following issues for Hidalgo County, Texas (the county):

-- $39.9 million combination limited tax and limited pledge revenue certificates of obligation (COs), series 2006;

-- $2.2 million limited tax general obligation (GO) refunding bonds, series 2006.

Fitch also affirms the 'A' rating on the county's $3.1 million GO bonds and $123 million COs. The Rating Outlook is Stable.

The bonds and certificates are scheduled to sell on Aug. 28 via negotiation to a syndicate led by JP Morgan Securities, Inc. The bonds constitute direct obligations of the county payable from a continuing direct annual ad valorem tax limited to $0.80 per $100 taxable assessed valuation (TAV), levied on all taxable property within the county. In addition to the ad valorem tax, the certificates are secured by a net surplus revenue pledge from the operation of the county's parks not to exceed $1,000. Proceeds from the certificates will fund various capital improvement projects and the bonds will refund certain of the county's outstanding bonds for interest savings.

The 'A' rating and Stable Rating Outlook reflect the county's low direct and moderate overall debt burden, healthy tax base growth, and restored financial reserves. Also considered in the rating are increased requirements in services and infrastructure brought on by rapid population growth, and below-average income levels and high unemployment rates that are typical of border communities. Tax base growth is solid, with the county experiencing several consecutive years of TAV increases due, in part, to sustained building activity. Also, the county's five-year capital improvement plan (CIP) although large, appears to be manageable with a healthy TAV growth pattern and low debt service tax rates.

Hidalgo County, located in the southernmost region of Texas bordering Mexico, has a population of more than 675,000. The cities of McAllen, Mission, and Edinburg (serving as the county seat) are the largest cities in the county. The leading sectors of commerce are tourism, agribusiness, and trade with Mexico. In particular, the tourism and trade sectors have led to rapid population growth, rising approximately 50% from 1990-2000 and another estimated 20% in the last five years.

Service demands, stemming in part from the population and commerce growth, led to challenges generating sufficient revenue to meet expanding operational requirements, including the cost of housing county inmates in facilities outside of the county, mostly marked between 2000 and 2002. However, management took corrective action to balance the budget in fiscal 2003 by increasing the maintenance & operations tax rates by $0.07 and applying stringent cost containment strategies. As a result, the county significantly increased financial reserves by $9.6 million. Since then, the county has continued to generate operating surpluses, albeit at a reduced rate, and for fiscal 2005 unreserved, undesignated reserve levels were $12.5 million or over 11% of spending. The county maintains a formal fund balance policy requiring an unreserved, undesignated fund balance of 5-7% of spending.

Direct debt burden is low at about $258 per capita and less than 1% of TAV. The county's five-year CIP through 2010 calls for nearly $136 million, primarily to be spent on roads and buildings. Because of strong TAV growth, no significant tax rate increase is expected as a result of the capital plan, despite its large size. Overall debt is moderate at $1,911 or nearly 6.5% of TAV; however, after considering state support for school district debt, these ratios is decrease to approximately $1,069 on a per capita basis and 3.6% as a percentage of TAV.

Commerce continues to be on the upswing, creating additional jobs and increased opportunities for trade activity with Mexico and thereby attracting additional newcomers to the county. The building activity has been sustained and continues to benefit the county with compound TAV average growth of 7.8% in the last five fiscal years. Unemployment rates, while historically high, have decreased as economic activity has expanded. Also, wealth levels, while remaining well below average, are generally growing at more than double that of the state and nation.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.