Fitch Rates Amarillo Junior College District -- Texas -- GOs 'AA'.

AUSTIN, Texas -- Fitch Ratings assigns a rating of 'AA' to $10.7 million of Amarillo Junior College District (AJC, or the district), Texas' general obligation (GO) refunding bonds, series 2005, which are expected to price Jan. 24 via a syndicate led by Morgan Keegan & Co. Additionally, Fitch affirms its 'AA' rating on the district's approximately $6.9 million in outstanding GO bonds. The Rating Outlook is Stable.

The bonds are direct and voted obligations of the district, payable from an ad valorem tax levy within the limits prescribed by law on all taxable property within the district. The maximum property tax rate for debt service is $0.50 per $100 taxable assessed valuation. Proceeds will be used to refund outstanding series 1995 bonds for interest savings and pay costs of issuance.

Fitch's rating of 'AA' on the district's GO bonds reflects steady growth in its enrollment and tax base, low debt load, and satisfactory financial performance. Steady gains in enrollment and taxable values as well as tuition rate increases and expenditure controls have enabled the district to absorb state appropriations cuts while maintaining positive financial performance. The lack of a formal borrowing plan poses some risk. However, the district has historically taken a conservative approach to debt financing.

The district's taxing jurisdiction is coterminous with the City of Amarillo, which covers both Potter and Randall counties. The city's 2000 census grew by more than 10% since the last census and now totals over 181,000. Amarillo serves as the banking, distribution, and commercial center for the Texas panhandle. The district's entire service area, which includes 26 counties, is estimated to total about 400,000. Steady commercial and residential development, averaging over $200 million per year since fiscal 1999, has enabled the city to maintain steady and notably low unemployment rates. Healthcare and food production and distribution are the largest area employers.

AJC is a multi-campus system. The district's major capital programs were completed in the mid-1990s. The lack of additional debt financing since then has resulted in a very favorable debt profile and principal payout. Future debt plans are uncertain at this time. However, deferred maintenance needs are reportedly modest and addressed through the ongoing use of current reserves.

Enrollment trends have been positive, with student headcount growing to approximately 12,300 for the fall 2004 semester, a nearly 50% increase since fall 1998. A new branch campus in Hereford is scheduled to open in fall 2005; school district voters approved a $0.05 maintenance tax, which along with tuition, will fully support campus operations. Approximately 300 to 350 students are projected to attend the Hereford campus.

Typically, public colleges and universities record break-even operating results. Audited fiscal 2004 results show about a $400,000 change in net assets and an operating margin of 0.7%. Diversity of revenue sources lends to stability, with the district dependent on a combination of state appropriations, property taxes, and tuition and fees for operations. As in the case of all state agencies, state appropriations have been reduced, beginning in fiscal 2003. However, reductions have been offset by expenditure cuts, tuition rate and property tax increases, as well as enrollment and tax base growth. No programs have been eliminated.

Despite the increases in operating taxes and tuition rates, the district maintains additional flexibility through available taxing margin as well as low tuition rates in comparison to the state's other community colleges. Liquidity levels are satisfactory, with AJC maintaining over three months' operations in available unrestricted and debt service funds.