Dallas Cnty Util & Reclamation Dist TX GOs Rtd By Fitch IBCA.

NEW YORK--(BUSINESS WIRE)--Aug. 4, 1999--

Dallas County Utility and Reclamation District (DCURD), TX's $28,225,198 unlimited tax refunding bonds, series 1999A, $149,550,000 unlimited tax refunding bonds, series 1999B, and $39,075,000 unlimited tax refunding bonds, series 1999C, are rated `BBB-` by Fitch IBCA.

The bonds are scheduled to sell on a negotiated basis on Aug. 10 via a syndicate led by Merrill Lynch & Co. The bonds are to be insured by AMBAC Assurance Corp. and rated `AAA' upon closing. The series 1999B bonds are expected to be delivered on or about Nov. 18, 1999 and the series 1999C bonds are expected to be delivered on or about Nov. 19, 2002. Proceeds will be used to refund the majority of the district's outstanding bonds in order to reduce the interest and sinking fund tax rate.

The underlying `BBB-` rating reflects the district's large and growing tax base, satisfactory finances, taxpayer concentration, and heavy debt load. Tax rates are high, and the rating assignment recognizes the importance of the refinancing to district efforts in maintaining and improving its competitive position with the strong Dallas-Fort Worth commercial real estate market. P. Created in 1972 as a municipal utility district and reorganized and converted into a conservation, utility, and reclamation district in 1984, DCURD provides services related to flood control, water supply, land reclamation, street and road transportation, and water conservation. The district lies within the city of Irving, and is a part of the prestigious Las Colinas Development (LCD), a 12,000 acre mixed-use master- planned community. Its strategic location, with easy access to Dallas-Fort Worth International Airport and downtown Dallas has attracted substantial development. LCD corporate residents include Exxon, GTE, and Kimberly Clark.

DCURD comprises over 3,600 acres of land, most of which is targeted for the LCD's most dense commercial development. Most of the district is located in the Las Colinas Urban Center, which continues to post some of the highest average class A rents in the metroplex. Multi-tenant occupancy rates have dropped slightly with the increase in new construction, but remain healthy at about 90%. Single owner occupied buildings are reporting 100% occupancies. Taxpayer concentration poses some risk, with Teachers Insurance and Annuity Association (TIAA) representing nearly 25% of taxable values. However, officials report that TIAA holdings within the district are debt free, and that the properties of other large taxpayers are not highly leveraged, providing some comfort.

The current taxable assessed value is estimated at over $1.5 billion, a 10% increase over the prior year's total. Assessed values have increased on average 15.5% annually over the past five years. Currently, there are number of projects underway or nearing construction, including an 80-acre $36 million retail development, a $35 million hotel, and several office buildings. Prospects for additional growth appear favorable. In addition to the reduction in tax rate, approximately 35% of the district is available for development, and the only available 50-acre or more sites in the LCD, best suited for large corporate users, are in DCURD. Also, the district has been successful in attracting development by actively promoting its abatement program. Since 1995, the district has entered into approximately 20 abatement agreements, potentially adding nearly $1 billion to the rolls. Of note, abatements are on improvements only and are subordinate to debt service on the bonds. Furthermore, infrastructure is in place for all but about 300 acres.

DCURD's debt load is substantial and the halt in development and decline in assessed valuation associated with statewide recession of the late 1980s to mid-1990s resulted in several refinancings, enabling the district to restructure its debt. The current offering will essentially refund all outstanding debt to allow the district to reduce its debt service tax rate. Officials hope to lower the interest and sinking fund to $0.90 from $1.24 levied in fiscal 1999. Debt service is stretched with increasing payments through 2029. Direct debt to taxable value is very high at about 17%. However, debt ratios should improve, given anticipated gains in taxable resources and the absence of additional borrowing plans. In addition, the creation of a tax increment district is currently under consideration by the district and the city of Irving. If approved, a portion of collections could be allocated to pay down district debt, given that capital needs are relatively limited.

Finances are satisfactory. Operations are primarily supported by an operations and maintenance tax levy. Property tax collections remain strong. District governance will change in October 1999, when the elected board is replaced by appointments from the city of Irving, which should benefit capital planning efforts.