Fitch Rates Leander ISD, Texas' $279MM ULT Bonds 'AAA' PSF/'A+' Underlying

AUSTIN, Texas--(Business Wire)--
Fitch Ratings has assigned an 'AAA' rating to Leander Independent
School District, Texas' (the district) $279.3 million unlimited tax
school building and refunding bonds, series 2008. The 'AAA' rating is
based on the guaranty by the Texas Permanent School Fund (PSF). Fitch
has also assigned an 'A+ underlying rating to the series 2008 bonds
and affirmed the 'A+' rating on the district's $887 million in
outstanding unlimited tax bonds (post refunding). The Rating Outlook
is Stable.

The bonds are scheduled to be sold the week of April 28 via a
negotiated sale. Payment for the bonds is provided by an unlimited ad
valorem tax levied against all taxable property within the district.
The bonds are also secured by the Texas PSF guarantee. Bond proceeds
will be used for construction and equipping of school buildings,
renovation of existing facilities, purchase of land and buses, and to
refund a portion of the district's outstanding unlimited tax debt for
interest savings.

The underlying 'A+' rating on the district's unlimited tax bonds
reflects its history of solid financial performance while contending
with pressures associated with rapid enrollment growth. This success
has been the product of sound management and planning practices and a
conservative budgeting philosophy. The district continues to attract
new students at a rapid pace. Enrollment, currently totaling
26,500-plus students, has grown by nearly 10% annually for the past
five fiscal years. Despite increased spending pressures associated
with higher enrollment, the district continues to add to its healthy
reserve levels. However, growth-generated debt issuances keep debt
ratios at very high levels.

Largely residential in character, the district serves a nearly
200-square-mile area in southwestern Williamson County and western
Travis County and is part of the Austin metropolitan area. The
availability of affordable housing continues to attract buyers from
all parts of central Texas. As a result, demographic projections
suggest enrollment will more than double to about 58,000 by fiscal
2018. The district's taxable assessed valuation (TAV) growth rate
slowed somewhat in fiscal years 2004 and 2005; however, spurred by
strong residential construction, TAV growth expanded rapidly over the
past three fiscal years, averaging annual gains of nearly 20% since
fiscal 2006.

Financial results continue to be impressive, reflecting the
conservative nature of the budgeting and planning practices of the
district. The district consistently has recorded operating surpluses,
and another operating surplus is projected for fiscal 2008. At the
close of fiscal 2007, the unreserved general fund balance totaled
roughly $60 million, which represented 36% of spending and transfers
out. This result handily exceeded the district's optimum unreserved
general fund balance target of 25% of expenditures. Healthy reserve
levels enhance the district's financial flexibility, which Fitch
considers a credit strength.

District debt levels, as measured on a per capita basis and as a
percentage of TAV, are very high. In addition, amortization is slow,
reflecting the use of capital appreciation bonds (CABs) to minimize
tax rate impacts and to shift the debt burden to future taxpayers. In
addition, recent debt offerings (including the series 2008 bonds) have
been structured with a payout exceeding 30 years in order to meet the
district's capital requirements while keeping the debt service tax
rate below the Texas attorney general's $0.50 per $100 of TAV debt
service tax rate cap. Debt ratios will likely remain high for some
time, given the district's additional borrowing needs.

Approximately $232.4 million of this issuance represents the first
installment of a $559 million authorization approved by voters in
November 2007; the remaining $37.8 million in new money proceeds is
the final amount from a $286 million bond authorization approved in
May, 2006. The 2007 authorization will fund the construction of five
new elementary schools, one middle school and two high schools, school
design and renovations, site acquisitions, athletic facility
improvements, bus purchases and technology and other needs. This
offering also includes a small refunding portion, which is expected to
result in net present value savings.

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.

Fitch Ratings
Steve Murray, +1-512-215-3729, Austin
Eric Kim, +1-212-908-0527, New York
Media Relations:
Cindy Stoller, +1-212-908-0526, New York

Copyright Business Wire 2008