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Fitch Rates Canyon ISD, Texas GO Bonds 'AAA' PSF/ 'A+' Underlying.

AUSTIN, Texas -- Fitch Ratings assigns an 'AAA' rating to Canyon Independent School District, Texas' (the district) $50.5 million unlimited tax 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 'A+' underlying rating to the series 2007 bonds and affirms the underlying 'A+' rating on the district's approximately $69.3 million in outstanding unlimited tax bonds. The series 2007 bonds are scheduled for a negotiated sale on Feb. 7 via a syndicate led by Southwest Securities. 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 refund a portion of the district's outstanding debt and pay costs of issuance.

The 'A+' underlying rating reflects the district's maintenance of healthy reserve levels, conservative budgeting and debt management practices, and steady tax base growth. The rating also reflects a below-average amortization rate, a stable yet somewhat limited economy, and additional borrowing plans. Recent growth in the district has occurred primarily from residential development pushing south from the city of Amarillo. Despite ongoing and projected enrollment growth, financial performance is expected to remain favorable.

The district is located in Randall County, which is approximately 15 miles south of downtown Amarillo, and serves a large, primarily rural 720-square-mile area. District boundaries encompass the City of Canyon as well as portions of southern Amarillo. Taxable assessed valuation (TAV) growth continues to exceed student enrollment growth at 7.3% annually since fiscal 2002. The tax base is predominately residential, and area wealth levels are above the Amarillo metro area, state, and national averages.

Enrollment growth has remained manageable at a five-year annual average of 1.7%; however, district officials point to a recent demographic study that indicates ongoing residential development is expected to add 300-400 new students each year to the district within the next five years. This type of enrollment growth would be a jump from the roughly 100 students historically added annually.

The district's trend of solid reserves continues to be a plus for the district, as it has maintained fund balance from 21% to almost 30% of total expenditures and transfers out since fiscal 2002. Audited fiscal 2006 results reflect the continuation of this trend, and the unreserved/ undesignated fund balance rose almost 5% from the prior fiscal year to 18.4% of total expenditures and transfers out. The fiscal 2007 budget was balanced and included salary increases for teachers, staff, and administrators. District officials indicate that financial performance in fiscal 2007 is currently better than budgeted and that they expect to add to fund balance by the close of the fiscal year.

Including the current offering, the district's direct debt burden stands at 3% of TAV and $1,381 per capita. The inclusion of overlapping debt increases the overall debt burden to a moderate 3.8% of TAV and $1,737 per capita. The district's debt no longer receives substantial state support as in prior years. A below-average amortization rate of 35% of outstanding debt retired in 10 years currently characterizes the district's debt profile.

The current offering will be used to refund certain outstanding obligations and generate a net $2.3 million present value savings for the district. The district last went to voters in September 2001 for a successful $66 million bond authorization. District officials anticipate seeking a new $25 million-$30 million bond authorization this May in order to build two new elementary schools.

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.
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Publication:Business Wire
Date:Jan 30, 2007
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