Correction: Fitch Rates Judson ISD, Texas Series 2005A GOs 'AAA' PSF; Series 2005B 'A+'.

AUSTIN, Texas -- (This is an amended version of a press release issued yesterday and contains a revised headline and new series information in the first paragraph.)

Fitch Ratings assigns an 'AAA' rating to Judson Independent School District, Texas' (the district) $9.6 million unlimited tax refunding bonds, series 2005A. The rating reflects a guarantee provided by the Texas Permanent School Fund, whose insurer financial strength is rated 'AAA' by Fitch Ratings. In addition, Fitch assigns an 'A+' rating to the district's $22.4 million unlimited tax school building bonds, series 2005B. Both series of bonds are expected to price Dec. 15 via a syndicate led by RBC Dain Rauscher. Fitch also affirms the underlying 'A+' rating on the district's outstanding $187.9 million unlimited tax school building bonds. The Rating Outlook is Stable.

The underlying 'A+' rating reflects the district's solid financial results and conservative fiscal management, steady gains in taxable assessed valuation (TAV), and moderate debt position. The availability of land continues to attract residential development and spur enrollment growth. Despite ongoing operating pressures associated with growth, financial performance remains favorable, with unaudited fiscal 2004 results pointing to a continuation of this positive trend. Growth-related capital needs are substantial and another bond election is anticipated. While debt ratios will likely rise with additional borrowings, continued steady gains in population and taxable assessed valuations (TAV) should help mitigate increases in the district's debt position.

Located immediately northeast of the City of San Antonio, the district serves the residential communities of Universal City, Live Oak, Selma, Converse, and Kirby. Student average daily attendance has risen 12% since fiscal 2000 and continues to grow in response to development of the district's affordable housing market, as well as commercial growth within the district. TAV of the district has risen over 40% since fiscal 2000, with the trend expected to continue given that the district is only 50% developed.

Financial performance has generally been positive, despite ongoing growth pressures and the absence of available operating taxing margin. Financial results have benefited from a combination of conservative management practices and growth in TAV, as well as the receipt of some one-time insurance proceeds. For the close of fiscal 2003, audited results point to an ending general fund balance of $21.5 million, or nearly 21% of operating expenditures and transfers out. Furthermore, the majority of reserves are unreserved and undesignated, adding to financial flexibility. Unaudited financial results for fiscal 2004 show about a $5 million addition to general fund reserve levels, although the district is expected to designate approximately $3 million of the fund balance for future school site acquisition.

The series 2005A bonds will refund approximately $9.5 million in outstanding series 1997 bonds. While a small present value savings is expected to be realized, most of the savings associated with the refunding will occur in the early years as the district attempts to hold the interest and sinking fund tax rate at its current level. The series 2005B bonds represent the final phase of borrowing of a $154 million authorization approved by voters in October 2001. Amortization is below average at about 34% in 10 years, with all debt repaid by 2030. Reportedly, the district's capital plan is on schedule and within budget.

Given the growth, capital requirements are sizable. Another bond election is likely for fall 2005, as the district has identified the need for an additional high school, several elementary schools, and possibly a new middle school to meet growing student demand. The decision to go back to the voters for another bond authorization is expected to occur once the search for a new superintendent has been completed.