Fitch Rates Schertz-Cibolo-Universal City ISD 'AAA'

Business Wire, June 27, 2000

Business Editors

NEW YORK--(BUSINESS WIRE)--June 27, 2000

Schertz-Cibolo-Universal City Independent School District, TX's $10,000,000 unlimited tax school building bonds, series 2000 are rated 'AAA' by Fitch. The rating is based on the guarantee provided by the Texas Permanent School Fund (PSF), whose claims-paying ability is rated 'AAA' by Fitch. The bonds are scheduled for a competitive sale on June 28. Dated July 1, 2000, the bonds mature serially Aug. 1, 2005-2020. Bonds maturing on or after Aug. 1, 2011 are subject to optional redemption, in whole or part, beginning Aug. 1, 2010 at par plus accrued interest to date fixed for redemption. In addition, Fitch has assigned an initial underlying rating of 'A+', reflecting credit quality without consideration of the PSF guarantee.

The underlying 'A+' rating reflects the district's good financial position, strong tax base growth, and manageable debt load and capital plan. The district continues to record steady enrollment gains, with the trend expected to continue given ongoing development as well as the presence of substantial undeveloped land within district boundaries. Although growth generated pressures will persist, anticipated tax base growth and existing operating taxing margin provides added financial flexibility.

The district serves a growing area north of San Antonio; easy access to the large and growing metropolitan employment base coupled with the availability of more affordable land continues to spur development. Taxable values have increased on average 11.5% annually over the past five years. A 13%-14% increase is projected for fiscal 2001. In addition to strong residential growth, commercial development along Interstate 35 and Interstate 10, both of which are major thoroughfares, continues at steady clip. Guadalupe County unemployment levels remain well below state and national averages, while area median household incomes are slightly below average.

Despite recent drawdowns associated with capital needs, the district's financial position remains favorable. For the close of fiscal 1999, the general fund balance equaled nearly 20% of expenditures and transfers out. The unreserved plus the designated contingency amount represented close to 17%. Preliminary fiscal 2000 results are expected to show an increase in reserves, as the district attempts to reach its fund balance goal of a three-month operating reserve. Growth in taxable values has outpaced enrollment gains, which have averaged about 6% annually per year, enabling the district to remain under the state-wide taxing limit of $1.50 per $100 assessed valuation (unlike some its neighboring districts), providing additional financial flexibility. The district's current operation and maintenance tax rate is at about 92% of the limit.

The current offering represents the initial phase of borrowing associated with a $76.9 million authorization approved by district voters in May 2000. The authorization, to be issued over the next 4 years, will fund various improvements and renovations throughout the district. In addition, approximately $500,000 of the current offering will reimburse the district for capital expenses related to the bond program. District projections show that sizable debt service tax rate increases will be needed to fund the entire bond program, assuming continued 10% annual tax base gains but no additional state support. The district's debt ratios, which incorporate state support on outstanding bonds, are quite reasonable at 2.8% debt to market value and $896 debt per capita. Payout is slightly below average at 37.5% in ten years; however, all debt is retired in 20 years. Future issuances are expected to be structured as 20-year maturities. Officials anticipate that the current authorization will be sufficient to meet district needs for the next 10 years.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.