Fitch Rts $80.9MM Mansfield ISD, Texas GO Bonds 'AA-' Und

Business Wire, July 18, 2002

Business Editors

AUSTIN, Texas--(BUSINESS WIRE)--July 18, 2002

Fitch Ratings assigns a 'AA-' rating to $80,854,996 of Mansfield Independent School District (the district), TX's unlimited tax school building and refunding bonds, series 2002. Additionally, Fitch has affirmed the underlying 'AA-' rating on the district's $202,903,000 outstanding general obligation bonds. The district has applied for bond insurance through the Texas Permanent School Fund (PSF). Upon their approval, the 'AAA' rating will be assigned to the current offering based on the financial strength of the PSF, which is rated 'AAA' by Fitch. The bonds are scheduled to be sold on a negotiated basis to a syndicate led by Morgan Keegan on July 29. Dated July 15, 2002, the current interest bonds mature Feb. 15, 2007-2027 and the capital appreciation bonds mature Feb. 15, 2014-15. The bonds are direct obligations of the district and are payable from an ad valorem tax levied, without legal limitation as to rate or amount, on all taxable property within the district. Bond proceeds will be used to construct, renovate and equip school buildings, refund a portion of the district's outstanding debt, and to pay issuance costs.

The 'AA-' rating reflects the district's strong financial management and position, rapid tax base growth, adequate but declining operating tax margin, and strong community support for growth-related capital programs. The rating also reflects the district's high debt burden and below average principal amortization. Strong growth in the district's industrial base continues to attract jobs and investment to this Dallas-Ft. Worth metroplex community. As one of the state's fastest growing school districts, it's the district's goal to continue expanding its financial margins to mitigate the tax rate impact of additional schools. The district employs extensive facilities planning and annual demographic analysis to help manage its growth.

Located southeast of Ft. Worth, the majority of the district lies in southeastern Tarrant County, with a smaller portion overlapping into Johnson County. District enrollment growth has averaged 7% - 10% annually for the past five years, placing it among the 25 fastest growing districts (with enrollment of 4,000 or more) in the state. Ten-year demographic projections, updated annually to assist facilities planning, predict its current enrollment of 17,040 to double in eight years.

The current offering is derived from two authorizations, a $180.5 million authorization approved by voters in March 2001 and a $25.0 million authorization approved by voters in February 2002. Together, the authorizations will be used for additional schools needed to provide sufficient capacity through the 2004-2005 academic year. Overall debt burden is high at $3,838 per capita and 7.9% of taxable value, however continued rapid tax base growth is expected to keep future levels manageable. Principal amortization is below average at 28% for 10 years and designed to minimize the tax impact for future debt issues.

The district's fast growing economy is marked by continuing expansion of its large industrial base, new growth in its retail sector, and substantial residential construction. Assessed valuation (AV) growth has averaged 16.9% per year since fiscal 1997. Currently, over 12,000 single-family homes are in various stages of development in 45 different subdivisions, most of which are located in the City of Mansfield, with a smaller portion in the cities of Grand Prairie and Arlington. Under conservative AV growth assumptions, a 5.6 cents tax rate increase is anticipated to result from the current offering. Considerable margin remains with the district's operations and maintenance (O&M) tax levy, currently at $1.34 per $100 assessed valuation, which is statutorily limited to $1.50. However, the fiscal 2003 budget is anticipated to increase this component of the tax rate by 4.5 cents.

The district's financial position and management have been strong, as evidenced by substantial operating surpluses since fiscal 1996. Consistent surpluses, totaling $1.6 million-$4.8 million, have increased the district's unreserved undesignated fund balance from 17.8% in fiscal 1997 to 22.7% in fiscal 2001, exceeding management's past goal to maintain reserves with a minimum of two months operating expenses plus start-up costs for new schools. This goal was recently increased to two and one-half months in light of a steadily growing expenditure base. District officials anticipate another operating surplus, albeit modest, for fiscal 2002.