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Fitch Upgrades Outstanding Pottsboro ISD, TX GO Bonds to 'A-'.

AUSTIN, Texas -- As part of ongoing surveillance, Fitch upgrades Pottsboro Independent School District (the district), TX's unlimited tax refunding bonds, series 1993, and unlimited tax school building and refunding bonds, series 1998, to 'A-' from 'BBB+'. The Rating Outlook is Stable.

The upgrade of the district's underlying rating reflects its much improved debt profile, consistently strong tax base growth, and maintenance of large financial reserves. Modest growth of its small enrollment base has precluded the district from experiencing capital pressures. Its favorable location along Lake Texoma on the Texas-Oklahoma border has led to high-end residential development, benefiting the district's tax base with minimal impact on its enrollment base. As a result, the district has preserved flexibility in its financial operations through its below-average maintenance tax rate.

The district is located in Grayson County, near the cities of Denison and Sherman. District population is estimated at 10,000 in 2005, a 35% increase from 1998 (when last rated by Fitch). Enrollment totals about 1,300, having grown by under 2% annually since fiscal 1999. The district borders Lake Texoma, a major recreational tourist draw, which marks most of Grayson County's boundary with Oklahoma to the north.

Although modest in total size, the district's taxable assessed values (TAV) have grown by an impressive compound annual average of over 10% since fiscal 1999. The district's top-10 taxpayers make up a moderate 14% of TAV, led by a drilling equipment manufacturer with over 4% of valuation. TAV per capita, at over $48,000, is above average given its rural location.

The district's growth in taxable values and the subsequent implementation of state assistance for debt service has substantially improved its debt profile since Fitch's initial rating in 1998. The overall debt burden has decreased from 1998's level of $2,646 per capita and 6.8% of TAV to about $800 per capita and under 2% of TAV. Principal amortization has also improved to a more average 55% in 10 years (including the accreted values of its capital appreciation bonds).

The district's financial performance continues to be solid, with undesignated reserves totaling 18%-32% in fiscal years 2000-2004. Most recently, the district posted a modest operating deficit, but still maintained undesignated reserves equal to 23% of spending, nearly in compliance with its three-month fund balance goal. Because growth of its taxable values has exceeded its enrollment growth, state aid revenues have declined from 47% of total general fund revenues in fiscal 2000 to 29% in fiscal 2004. Fiscal 2005 results are not expected to change current reserve levels notably and the proposed fiscal 2006 budget is balanced at the existing tax rates.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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:Aug 22, 2005
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