Fitch Rates Burleson ISD, Texas' $82.6MM GOs 'AAA' PSF/'A' Underlying

AUSTIN, Texas--(Business Wire)--
Fitch Ratings assigns an 'AAA' rating to Burleson Independent
School District, Texas' (Burleson ISD, or the district) $82.6 million
unlimited tax school building bonds, series 2008, based on a guaranty
provided by the Texas Permanent School Fund (PSF), whose insurer
financial strength is rated 'AAA' by Fitch. In addition, Fitch assigns
an underlying rating of 'A' to the series 2008 bonds and affirms the
district's approximately $147 million in outstanding parity bonds. The
Rating Outlook is Stable.

Scheduled for a competitive sale July 31, 2008, the bonds are
direct obligations of the district, secured by the proceeds of an
unlimited ad valorem tax levied against all taxable property within
the district. The bonds are further secured by the Texas Permanent
School Fund guaranty. Proceeds will be used to finance various school
facility projects and pay costs of issuance.

The underlying 'A' rating is based on the district's strong tax
base growth, continued solid financial reserves, and high debt levels
with very slow amortization. Given ongoing and planned development,
additional credit risks include operating and capital pressures
associated with continued enrollment growth, although the area's
housing construction slowdown has recently lessened these pressures
somewhat. However, current financial performance and expected tax base
growth suggest the district will be able to maintain its financial
profile satisfactorily over the near term.

Burleson ISD is located in the northern portion of Johnson County
and south central portion of Tarrant County, approximately seven miles
south of Fort Worth, along Interstate Highway 35 West. The district
contains the city of Burleson (general obligation bonds rated 'A+' by
Fitch), which is the principal commercial center. With an estimated
2007 population of nearly 34,000, the city has experienced rapid
growth at a rate of almost 7% annually since 2000. Affordable land,
new transportation routes, and proximity to the Fort Worth-Arlington
metro area have in recent years spurred residential development
primarily in the north and western portions of the district, although
estimates indicate only 40% of the district is currently built out.
Tax base growth, which has been historically weighted toward
residential property values, continues to outpace student enrollment
gains at 12% annually over the past five years. Various properties
within the district's boundaries are located in workable portions of
the Barnett Shale, one of the United States' largest natural gas
fields, and starting in fiscal 2008, mineral values contributed to a
small portion of the district's tax base. However, Fitch anticipates
that mineral values will contribute more substantially to the
district's tax base over the near term with additional drilling and
exploration in the area.

In fiscal 2008, the district's enrollment reached almost 9,000
students, having grown at an annual average rate of 5% since fiscal
2003. Like many other Texas school districts, Burleson ISD experienced
an enrollment slowdown in fiscal 2008, due in large part to a slowdown
in housing construction. Accordingly, enrollment growth projections
have been revised downward over the next three fiscal years, although
enrollment is projected to grow at around 400-500 students annually,
due in part to new multi-family developments in the area.

The district's financial reserves have trended upwards since
fiscal 2002, and audited results for fiscal 2007 continued that
pattern. The district reported a very strong, unreserved general fund
balance of $14 million or 27% of spending in fiscal 2007, which
exceeds the district's informal operating reserve target of at least
three months of expenditures. Fiscal 2008 results are anticipated to
add between $1 million-$4 million to this cushion, due in large part
to the district leasing its mineral rights on various properties. The
district received an almost $3 million bonus payment from Chesapeake
Energy Corporation (long-term IDR of 'BB' with a Negative Outlook),
and over the near term, this agreement is expected to generate
$700,000 annually for the district. Preliminary information regarding
fiscal 2009 includes the expectation of a balanced budget with modest
salary increases and new hires for the additional elementary schools
that are scheduled to open August 2008. While an additional,
discretionary operating tax levy might be sought from voters as early
as 2008, district officials indicate it is more likely to occur in the
latter half of 2009.

District debt levels are high and Fitch believes they will remain
so considering ongoing growth pressures, even after factoring in state
support for a portion of existing debt service. The current offering
represents the second portion of the district's largest ever
authorization at $259 million, approved by about 60% of the voters in
November 2006. The current offering will be used primarily for
constructing the first phase of a new high school that is expected to
open by 2010. The remainder of the authorization is anticipated to be
issued in 2009 and is expected to meet the district's capital needs
for the next three to four years. Amortization of principal is very
slow, even for a fast-growth district, with about 17% retired in ten
years.

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, Austin
Rebecca C. Moses, 512-215-3739
Andy Kaaz, 512-215-3730
or
Media Relations:
Sandro Scenga, 212-908-0278, New York

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