Fitch Rates Birdville ISD, Texas' $102.8MM GOs 'AAA'PSF/ 'AA' Underlying; Outlook Stable.

AUSTIN, Texas -- Fitch assigns an 'AAA' rating to Birdville Independent School District, Texas' (the district) $102.8 million unlimited tax school building and refunding bonds, series 2007, based on a guaranty provided by the Texas Permanent School Fund (PSF), whose insurer financial strength is rated 'AAA' by Fitch. Fitch also assigns an 'AA' underlying rating to the series 2007 bonds and affirms the underlying 'AA' rating on the district's approximately $173 million in outstanding unlimited tax bonds. The series 2007 bonds are scheduled for a negotiated sale on Jan. 23, 2007 via a syndicate led by UBS Investment Bank. The Rating Outlook is Stable.

The bonds are direct obligations of the district, payable from and secured by an unlimited ad valorem tax levied against all taxable property within the district. The bonds are further secured by the PSF guaranty. Proceeds will be used to finance various capital improvements and pay costs of issuance.

The 'AA' underlying rating reflects the district's strong financial position, manageable student enrollment, and a healthy, diverse area economy. The rating also reflects moderately high debt levels and a slowing amortization rate with additional borrowing planned. Although the district is nearing full maturity, it faces notable capital needs to relieve overcrowding at the elementary and high school levels as well as renovate its older facilities. Current financial performance, however, suggests the district will be able to maintain its favorable financial profile.

The district is located in Tarrant County, next to the City of Fort Worth and northwest of the Dallas/Fort Worth International Airport. The district's 42 square mile service area includes the cities of North Richland Hills, Haltom City, Richland Hills, and Watauga, as well as a portion of the City of Hurst. Taxable assessed valuation (TAV) growth continues to exceed student enrollment growth at 5% annually since fiscal 2002. The tax base is predominately residential, and it serves as a bedroom community for the greater metropolitan area. Area wealth levels are above state and national averages. Birdville ISD remains one of Tarrant County's largest districts with more than 22,000 students since fiscal 2002; however, overall district enrollment growth is primarily flat, reflected in the slight decline of .04% annually in student enrollment over the past five years. Enrollment growth is still occurring within specific grade levels, particularly at the elementary and high school grade levels, however.

The district's financial performance has historically been strong, with general fund unreserved fund balances of roughly 22%-28% of expenditures, transfers out, and other uses since fiscal 2001; the general fund balance has included an annual $12.5 million designation for budget contingencies since fiscal 2003. Audited fiscal 2006 results reflect the continuation of strong reserve levels. The district bettered previously stated expectations with a smaller $1.7 million drawdown on general fund drawdown due to a one-time capital outlay and unprecedented utility/fuel costs. The fiscal 2007 budget included 2-9% salary increases for teachers, staff, and administrators and the district was able to maintain their competitive edge with one of the state's highest starting teacher salaries at more than $44,000.

With the current offering, the district's direct debt burden stands at 3.6% of TAV and $1,761 per capita. The inclusion of overlapping debt increases the overall debt burden to a moderately high 5.8% of TAV and $2,867 per capita. The district's debt no longer receives substantial state support as in prior years. A slowing amortization rate that is now about average at 52% of outstanding debt retired in 10 years currently characterizes the district's debt profile.

The current offering represents the first phase of borrowing in the amount of $90 million against a $128.6 million authorization approved by 56% of the voters in November 2006. The remainder of this offering includes funds for restructuring a portion of the district's outstanding debt and refunding certain outstanding obligations only if the interest cost savings generated equals at least $2.5 million. The $128.6 million bond package includes construction of a new Career & Technology Center, two replacement elementary school campuses, a replacement campus at Richland High School, as well as the renovation/ rehabilitation of existing facilities, all of which are expected to be completed by 2010. The district anticipates issuing the remaining $38.6 million authorization on or about August 2008.

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. The ratings above have been initiated by Fitch as a service to investors. The issuer did not participate in the rating process other than through the medium of its public disclosure.