Fitch Rates Wylie ISD, Texas GO Bonds 'AAA' PSF; 'A' Underlying.

AUSTIN, Texas -- Fitch Ratings assigns an 'AAA' rating to $25.7 million of Wylie Independent School District, Texas's (the district) unlimited tax school building bonds, series 2006, based on the guaranty by the Texas Permanent School Fund, whose insurer financial strength is rated 'AAA' by Fitch. In addition, Fitch assigns an underlying rating of 'A' to the series 2006 bonds and affirms the underlying 'A' rating on the district's $207.4 million in outstanding unlimited tax bonds. The bonds are scheduled to be sold via negotiation to RBC Capital Markets and First Southwest Company on June 1. The Rating Outlook is Stable.

The bonds are payable from an unlimited ad valorem tax levied against all taxable property within the district. Bond proceeds will be used for construction of a new elementary and intermediate school and to begin construction of a new high school.

The underlying 'A' rating reflects the district's growing tax base, stable financial operations despite growth pressures, adequate fund balance levels, and the strength and diversity of the regional economy. Also incorporated into the rating are the district's exceptionally high debt burden and additional capital needs to support the rapid growth. The district's rapidly growing tax base and prospects for continued growth, as well as management's conservative fiscal practices, somewhat mitigate concerns over the district's heavy debt load.

The district is located in Collin County, 23 miles northeast of Dallas and within commuting distance of the cities of Plano, Garland, and Richardson, as well as downtown Dallas. The northern expansion of the Dallas-Fort Worth metroplex over the past decade has produced steady population and student enrollment increases in the district. The economic base of the district is shifting from an agricultural area to one with an emphasis primarily on residential with some commercial and light manufacturing.

The district's taxable assessed valuation (TAV) continues to increase at a rapid pace averaging nearly 20% annually since 2001. While TAV gains outpaced enrollment growth in the last ten years, the district's enrollment rate is catching up. Enrollment has doubled to just over 9,000 students in the last five years with an average annual growth rate of 15%. The growing saturation of the larger neighboring communities of Plano, Richardson, and Garland will likely result in the continued development of Wylie, as is evidenced by almost 3,000 homes constructed in the last two years. Furthermore, the widening of state highway 78 will improve access to the area. County wealth levels are above those of the state and nation.

Direct debt ratios are very high at $9,000 per capita and 16% of TAV even after factoring in of state aid for approximately 28% of outstanding debt. Despite anticipated population and TAV growth, debt levels are expected to remain high for the foreseeable future. The current offering represents the third installment of the $148 million authorization approved by 56% of voters in May 2004 to meet ongoing enrollment growth needs. The district anticipates that proceeds from this sale will accommodate growth to approximately 13,000 students, at which time plans for the next sale of the remaining $20 million authorization will begin. Furthermore, the district will return to the voters for additional bond authorization when enrollment reaches 15,000. It is estimated that enrollment at build-out will be between 20,000 and 25,000 students.

Despite the pressures associated with rapid enrollment growth, financial performance is stable and adequate. For fiscal year 2005, the district recorded a $2 million operating surplus, increasing its unreserved and undesignated general fund reserve level to 11% of spending compared with 9% in fiscal 2004. The fiscal 2006 adopted budget is balanced; however, due to conservative enrollment projections, the district now anticipates another $1.5 million operating surplus.

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