Fitch Rates Mesquite ISD, Texas' ULT Bonds 'AA'; Outlook Stable

AUSTIN, Texas--(Business Wire)--
Fitch Ratings assigns an 'AA' rating to Mesquite Independent School District,
Texas' (the district) $25 million unlimited tax school (ULT) building bonds,
series 2009. In addition, Fitch affirms the district's approximately $435
million in outstanding unlimited tax bonds at 'AA'. The series 2009 bonds are
scheduled for a negotiated sale July 13, 2009.

The bonds are direct obligations of the district, payable from and secured by an
unlimited ad valorem tax levied against all taxable property within the
district. Proceeds will be used for technology improvements, construction of a
new wing at an elementary school, energy initiatives, and other capital
improvements.

The 'AA' rating is based on the district's strong financial management, sizeable
reserves, and moderate debt burden. Enrollment growth has declined from a 1%-2%
growth rate between fiscal 2003 and fiscal 2008, to a modest 0.3% for fiscal
2009. The declining enrollment growth has primarily resulted from the slowing
housing market in the city of Mesquite, which has been affected by the slowing
economy. Slowing enrollment growth could potentially affect state aid revenue
trends, making conservative budgeting key to the district's ability to maintain
structural balance; however, this trend is not expected to materially affect the
district's capital plan, since it relates primarily to school renovations and
additions and not new school buildings. Maintenance of strong reserve levels and
moderate debt levels will remain important rating drivers for the district.

The district encompasses 60 square miles in eastern Dallas County. Enrollment,
currently around 37,000 students, has grown at an annual average of roughly 1.3%
over the past five fiscal years. Located in a maturing, middle-class area, the
cities of Mesquite and Balch Springs, both of which lie within the district,
benefit economically from three interstate highways that traverse the district.
The district's economic base includes retail, manufacturing, warehousing, and
distribution enterprises. Residential development is strongest in the southern
portion of the district near Interstate 20, where the new Achziger Elementary
School is located.

Fitch considers the district's financial profile as strong. Management has
achieved positive operating results in each of the last six fiscal years. Most
recently, the district reported net income of $10.2 million in fiscal 2008,
increasing the unreserved, undesignated general fund balance to nearly $56
million or about 23% of spending. The district is expected to maintain these
fund balances levels for fiscal 2009. The fiscal 2010 budget does not anticipate
any major change to reserve levels as approved pay hikes, totaling about $5
million, will be offset by the state's increase in the district's per student
basic allotment.

The current offering represents the second issuance from a $180 million
authorization approved by approximately 74% of voters in May 2007. The district
will have $105 million in remaining authorization after this issuance.
Additional issuances are expected each year of approximately $25 million from
the remaining authorization, which will fund the district's capital improvements
through 2014. The majority of the authorization will be used for the renovation
or expansion of existing facilities plus construction of a new elementary
school.

District debt levels are moderate, and are expected to remain so considering
planned issuances, after factoring in state support for a portion of existing
debt service. The district's debt burden is moderate at 3.75% of taxable
assessed value (TAV) and $1,583 per capita, after adjusting for approximately
45% state support of outstanding general obligation debt. Overall debt is
manageable on a per capita basis of almost $2,300, or 5.45% of TAV. Amortization
is slightly above average with almost 56% of principal retired in 10 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
Andy Kaaz, +1-512-215-3730 (Austin)
Rebecca C. Moses, +1-512-215-3739 (Austin)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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