Correction: Fitch Rates Dallas ISD, TX $445MM GOs 'AAA', Underlying 'AA'.

NEW YORK -- (The press release dated Oct. 15, 2004 listed the series 2005 bonds as series 2004-B; subsequently, the district has restyled this series of bonds as series 2005 (delayed delivery)).

Fitch has assigned an 'AAA' rating to Dallas Independent School District, Texas' (the district) $400 million unlimited tax school building and refunding bonds, series 2004-A and $44.955 million unlimited tax refunding bonds, series 2005 (delayed delivery).

The rating is based on the guarantee provided by the Texas Permanent School Fund, whose insurer financial strength is rated 'AAA' by Fitch. In addition, an underlying rating of 'AA' has been assigned to the bonds and affirmed for the district's $930.1 million unlimited tax bonds outstanding. The bonds are scheduled for a negotiated sale on or about Oct. 27 through a group led by First Southwest Company. The series 2005 bonds are scheduled to have a forward delivery date of July 13, 2005. The underlying Rating Outlook is Stable.

Both series of bonds are payable from an unlimited ad valorem tax levied against all taxable property within the district. Series 2004-A proceeds will be used to finance the acquisition, construction and equipping of school buildings, and to purchase necessary sites, therefore, to refund a portion of the district's outstanding debt and to pay issuance costs. Series 2005 proceeds will be used to refund a portion of the district's outstanding debt and to pay issuance costs.

The 'AA' underlying rating reflects the district's sound financial condition and extensive and diverse economic and tax base. The current offering represents the fourth installment of $1.4 billion in bond authorization approved by a large majority of district voters in January 2002 to address aging and overcrowded facilities. Despite the sizable authorization level, debt burden and tax rates are projected to remain manageable. Offsetting credit considerations include an operations tax rate at the state-mandated ceiling, growing operational needs associated with the capital building program, and general uncertainty surrounding the future of state funding of public schools in Texas.

District financial results have been very solid over the past five fiscal years. The undesignated general fund balance in fiscal 2003 was roughly $104 million, or 11% of operating expenditures and transfers out; these results were aided by a change in the district's fiscal year-end. Preliminary fiscal 2004 results include net operating income of more than $1 million. A combined seven-cent debt service tax rate increase over the past two fiscal years signal the ramping up of the tax rate to pay for the new bond program. The operations and maintenance tax rate is now at the $1.50 per $100 taxable assessed valuation (TAV) state-mandated ceiling, thereby reducing the district's financial flexibility at a time of increasing operational needs.

The district's overall debt burden is a moderate 3.8% of TAV and roughly $1,850 per capita after this sale. The pace of debt retirement has slowed considerably with the past two debt offerings and is now below average. The final installment from the current authorization is anticipated in mid-2006. The district also is considering a bond election of at least $500 million around 2008 to address additional needs. A growing regional economy produced annualized TAV gains of nearly 9% from fiscal 1998-2002. However, TAV growth slowed appreciably over the past three fiscal years as the local economy cooled; the fiscal 2005 TAV of $59.4 billion represented a modest 1.7% increase from last year.

The district is the second largest in the state, with an estimated 160,000 students. Enrollment, which has declined marginally over the past three fiscal years, is projected to stabilize and show modest increases through fiscal 2010. The district serves the majority of the City of Dallas (the city), as well as all or portions of 11 area cities and towns, with a total estimated population of approximately 1.2 million. While the recent recession stalled job growth and produced unemployment rates in the city measurably higher than state and national averages, employment statistics for the past several months suggest that economic conditions both in the city and the metropolitan area are improving; the long-term prospects for the area remain very favorable.