Fitch Rates Mansfield ISD, TX $70MM GO Rfdg Bonds 'AAA' PSF/'AA-' Underlying.

AUSTIN, Texas -- Fitch Ratings assigns an 'AAA' rating to $70.1 million of Mansfield Independent School District, TX's (the district) unlimited tax refunding bonds, series 2007, based on a guarantee from the Texas Permanent School Fund (PSF), whose financial insurer strength is rated 'AAA' by Fitch. Additionally, Fitch assigns an underlying 'AA-' rating to the series 2007 bonds and affirms the 'AA-' rating on the district's $562.7 million outstanding unlimited tax bonds. The Rating Outlook is Stable.

The bonds are scheduled to sell via negotiation as early as March 22 to a syndicate led by Morgan Keegan & Company, Inc. The bonds are direct obligations of the district and are payable from unlimited ad valorem taxes and further secured by the PSF guarantee. Bond proceeds will be used to refund certain outstanding maturities for interest savings.

The 'AA-' underlying rating and Stable Outlook reflect the district's strong financial position, sound management practices, diverse and rapid growth of taxable assessed valuation (TAV), and consistent community support for growth-related capital programs. The rating also acknowledges the impact of sustained enrollment growth and related capital needs on the district's debt ratios, which are high but manageable; above-average wealth levels; and favorable prospects for continued rapid tax base expansion. State support for a portion of the district's debt also lessens the debt burden. Strong growth in the district's industrial base continues to attract jobs and investment to this Dallas-Ft. Worth metroplex community. As one of the state's fastest-growing school districts, it is the district's goal to continue expanding its financial margins.

Located southeast of Ft. Worth, the majority of the district lies in southeastern Tarrant County, with a smaller portion overlapping into Johnson County, and includes the city of Mansfield and portions of Arlington and Grand Prairie. The district is the third fastest growing in the state, growing an average of nearly 11% annually for the past five fiscal years, reaching an enrollment of nearly 28,000 students in fiscal 2007. Demographic projections, updated annually to assist facility planning, predict enrollment will increase by one-third to 37,000 by fiscal 2012.

In May 2006, district voters approved a record high $241.5 million bond package for the construction of six new schools, renovation of existing schools, and construction of an additional transportation facility. The district has $207.6 million of the authorized package remaining. At just over $3,000 per capita and 5.9% of taxable assessed value (TAV), direct debt ratios are high even after adjusting for state support of outstanding debt totaling about 30% of annual debt service. The overall debt burden is also high at just over $3,800 per capita and 7.3% of TAV. The district's high debt levels are a result of sustained double-digit enrollment growth brought about by explosive residential development. Principal amortization is below average at 29% for 10 years and is designed to minimize the debt service tax impact for the current authorization which is projected to peak at $0.45 per $100 of TAV, up $0.05 from its current level.

The district's financial position remains strong as management works to find savings, enabling it to achieve consistent surpluses ranging from nearly $1 million to $9.4 million since fiscal 1997 despite the fast growth. Fiscal 2006 posted a large $9.4 million operating surplus, increasing its undesignated fund balance to $41 million or over 28% of spending, in line with management's three-month goal. The fiscal 2007 budget is balanced, funds additional staff for four new schools, and includes $4 million of pay-as-you-go capital outlays for new buses. In anticipation of possible budget cuts necessary for a balanced budget in fiscal 2008, the board has authorized a reduction in force to facilitate a district wide review by a committee of parents, business leaders, and community leaders.

The district's fast growing economy is marked by the continuing expansion of its industrial base, substantial residential construction, new retail sector growth, and more recently, the healthcare sector with the addition of two hospitals and several medical centers. TAV has grown by a compound annual average of over 13% over the last five years. There are more than 12,000 single-family homes in various stages of development in more than 45 different subdivisions, most of which are located in the cities of Mansfield and Grand Prairie, with a smaller portion in Arlington.

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