Fitch Rts Canutillo ISD Pub Fac Corp, TX Lease Revs `BBB+'

Business Wire, March 27, 2001

Business Editors

NEW YORK--(BUSINESS WIRE)--March 27, 2001

Fitch assigns its `BBB+' rating to $2,465,000 lease revenue bonds, series 2000, of Canutillo Independent School District (ISD) Public Facility Corporation, TX (the corporation).

The bonds are expected to sell March 29 through negotiation to Dain Rauscher Inc. Dated March 15, 2001, the bonds mature Aug. 15, 2003-2022. In addition, Fitch has affirmed the underlying rating of `BBB+' to the corporation's $3,405,000 outstanding lease revenue bonds.

The `BBB+' rating reflects the district's sound financial management that supports the lease payments, fast principal amortization, moderate debt burden, and growing economy. Also incorporated in the rating are appropriation risks, as the lease payments are a current operating expense of the district's general fund. Available revenues include basic educational allotment funds, which are subject to annual state appropriation, and any unintended surplus of the district.

The lease revenue bonds are issued by the corporation and are payable from the trust estate including mortgage on facilities and security interest in the equipment purchased with bond proceeds. The source of trust estate revenues is semi-annual payments of the Canutillo ISD. The lease is an operating expense of the district's general fund. The district intends to make lease payments from the formula- based state education aid and any unintended surplus in the maintenance fund. The corporation is issuing the bonds and the district is entering into the lease with the corporation in order to finance the acquisition and remodeling of an administration building and district warehouse.

The district is experiencing moderate enrollment growth averaging 2% annually, however district officials anticipate growth to increase to 4% in coming years. The district covers 67 square miles in El Paso County and includes portions of El Paso and neighboring rural areas. The district benefits from the El Paso metropolitan strategic location and extensive transportation network, serving as a major port of entry linking Mexico, Texas, and New Mexico

Taxable values within the district are dominated by the industrial sector, which represent over 40% of total assessed valuation (AV). The Hoover Co. is the largest taxpayer, representing 11.8% of total taxable AV, with the leading 10 ten taxpayers representing over 27%. Economic growth is projected to continue, led by the completion of the Artcraft Highway - a six lane commercial thoroughfare that will connect the new port of entry from Mexico and feed into I-10.

Fiscal operations are sound with undesignated fund balances equal to 10.9% of expenditures and transfers out for fiscal 2000. State education funds are the largest source of district revenue, totaling $19.9 million in fiscal 2000. Because the district's AV growth has exceeded its enrollment growth, the rate of growth of the district's local share has exceeded the rate of growth in state funding. The state's basic allotment in fiscal 2001 is $8.4 million, up 6.5% from fiscal 1997; the district's local of $3.3 million is up 22.5% during the same period. Overall Tier I allotment in fiscal 2001 is $17.3 million, up 18.6% since fiscal 1997. Combined general fund and debt service expenditures in fiscal 2000 amounted to $30.3 million. The maintenance tax rate was increased in fiscal 2001 by over $0.13 per $100 AV in order to maximize state funding.

Including general obligation debt, overall debt burden is moderate at $827 per capita and 3.9% of taxable AV. Amortization is still well above average at 40.1% in five years and 71% in ten years. Debt service as a percentage of expenditures was moderate at 8.3% in fiscal 2000. Voters approved $23 million in general obligation bonds for the construction of a new high school. If Instructional Facilities Allotment (IFA) funds are approved for the district, approximately $7.5 million of bonds will be issued in August 2001.