Fitch Rates Dallas County, Texas' $27.5MM Community College District Revs 'AA'; Outlook Stable.

NEW YORK -- Fitch Ratings assigns its 'AA' rating to the Dallas County Community College District (DCCCD or the district) $27.5 million revenue financing system (RFS) bonds, series 2006. Fitch also affirms the 'AAA' rating on the district's outstanding $35.1 million maintenance tax notes, series 2003 and 2004 and the 'AAA' rating on the outstanding $65.3 million general obligation bonds. The series 2006 RFS bond proceeds will be used to refund a portion of the RFS series 2001 bonds. The bonds are to be sold through negotiation by Siebert Brandford Shank & Co., L.L.C. and Ramirez & Co., Inc. on Dec. 13. The Rating Outlook for all bonds is Stable.

The 'AA' rating on DCCCD's revenue financing system bonds is based on consistent enrollment, steady population and tax base growth, diversified revenue sources, a moderate overall debt position, and strong planning processes in place for capital and operating needs.

DCCCD's fall 2006 headcount enrollment was 59,874 and has been relatively stable since peaking in fall 2002 with 59,009 students. Like most community colleges, tuition and fees are attractive in recruiting students and are relatively low when compared to public four year universities in the state. DCCCD is able to keep its tuition affordable since approximately 65% of its revenue is derived from property taxes and state appropriations. The stability of property tax revenue, state appropriations and tuition and fees has led to solid financial performance. Additionally, financial flexibility is derived from DCCCD's available property taxing margin and low tuition rates in comparison to other community colleges in the state.

Positive financial performance is aided by conservative fiscal management and the prudent use of debt. On an overall basis, debt outstanding for DCCCD as of Aug. 31, 2006 was $146.2 million. Debt outstanding includes $44.8 million of revenue financing system bonds, $65.3 million of general obligation bonds and $35.1 million of maintenance tax notes. While each type of debt is payable from different sources, maximum annual debt service of $17.1 million for all of the debt would consume a manageable 5.3% of the district's revenues.

In addition to the stable enrollment and positive financial performance and flexibility, the 'AAA' rating on the district's outstanding maintenance tax notes and general obligation bonds reflects DCCCD's growing tax base, extensive economy, and favorable direct general obligation debt ratios. The fiscal 2007 taxable assessed valuation grew nearly 8% over the prior year's level to a substantial $151.8 billion. In addition, the Dallas metropolitan economy is broad and diverse. Insurance, banking, and finance are prominent sectors of the regional economy, as are health care, trade, tourism, electronics, and high technology manufacturing. The region's geographic accessibility and extensive transportation network have led to the development of national and international product distribution facilities. Metropolitan unemployment rates have recovered from the slowdown experienced in the first part of this decade, and are now comparable to state and national averages. County socioeconomic indicators also point to above average wealth levels, retail sales per capita, and taxable value per capita.

In May 2004, district voters approved by a wide margin a $450 million general obligation bond authorization which addresses district-wide improvements as well as establishes five new community campuses for underserved or rapidly growing areas in the county. Direct general obligation debt ratios are modest, but rise to above average levels with the inclusion the district's many overlapping units, including the city of Dallas and Dallas Independent School District (general obligation bonds rated 'AA' by Fitch). Payout is rapid, with about 62% of the district's general obligation debt repaid in 10 years. Recent state legislative changes now allow community colleges to issue commercial paper (CP); the district is considering the creation of a CP program. If approved by the board of trustees, the CP program would be implemented in the first quarter of 2007. A small general obligation bond sale is also planned for late fiscal 2007.

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