S&P Announces: Summary Analysis -- Harlingen Cons Indpt Sch Dist.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 7, 2004

Standard & Poor's Ratings Services affirmed its 'AAA' enhanced rating and 'A+' Standard & Poor's underlying rating (SPUR), and stable outlook, on Harlingen Consolidated Independent School District, Texas' unlimited-tax GO school building bonds. The enhanced rating is based on the Texas Permanent School Fund Guarantee.

The SPUR reflects the district's:

-- Continued strong financial performance and position, and

-- Improving debt ratios.

In addition, the SPUR continues to reflect the district's:

-- Property tax base, which benefits from a regional trade and

service economy and has experienced steady growth;

-- Structurally low income levels and high unemployment; and

-- Manageable capital needs.

Harlingen Consolidated Independent School District is in south Texas and includes the city of Harlingen, Texas ('A+'/Stable GO debt rating). Given the district's access to Mexico, manufacturing and distribution heavily influence the economy. With attractions such as South Padre Island and Laguna-Atascosa Wildlife Refuge, tourism has also developed into a leading industry. The $2 billion tax base is diverse: The 10 leading taxpayers account for 8.7% of total assessed value (AV). The property tax base has exhibited significant growth of about 7.8% annually over the past five years. New commercial and residential developments have driven much of the growth. Per capita effective buying income has increased by 12.8% since 1998 but remains a low 71.0% of the national average. Finally, student enrollment has remained fairly stable at about 15,900 annually.

Harlingen Consolidated Independent School District's financial position remains strong. The district's general fund balance experienced a substantial increase in fiscal 2003 to $41.9 million, or a strong 45.3% of expenditures. In addition, the district maintains some revenue flexibility with the current operating and maintenance tax rate of $1.45 per $100 of AV, which is below the $1.50 per $100 of AV state-mandated cap. For fiscal 2004, the district estimates an operating surplus that would increase the general fund balance to roughly $44 million.

The series 2001 issuance was the last portion of an $80 million, electorate-approved authorization from June 1999. The district used proceeds to fund the construction of a new middle school and a new instructional technology center. Management expects state aid to support roughly $8.5 million of the $13.0 million issue, reducing the overall burden to district taxpayers. Given state support, overall debt levels are a moderate $1,653 per capita, or 5.1% of market value. The district does not have plans to issue additional debt for another four to five years.

Outlook

The stable outlook on the enhanced rating reflects the strength and liquidity of the Texas Permanent School Fund. The stable outlook on the SPUR reflects the expectation that the district's financial reserves will remain strong and that the tax rate and debt burden will remain moderate.

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find Ratings, then Credit Ratings Search.

Copyright (c) 2004, Standard & Poor's Ratings Services