Fitch Affirms Del Valle ISD, Texas' ULT Bonds at 'A'; Outlook Stable

AUSTIN, Texas--(Business Wire)--
As part of ongoing surveillance, Fitch Ratings affirms the 'A' rating for Del
Valle Independent School District, (the district) Texas' approximately $168
million in outstanding unlimited tax (ULT) bonds. The Rating Outlook is Stable.

The 'A' rating reflects the district's more recently strengthened financial
position and growing enrollment base balanced against high debt levels, slowed
tax base growth, and above average taxpayer concentration. The district benefits
from its location in the broader Austin employment base and economy. While the
recent Chapter 11 bankruptcy filing of the district's largest taxpayer, Spansion
LLC, introduces a measure of instability to the district's current credit
profile, Fitch notes that the district's exposure to possible property tax
revenue losses is relatively modest as a percentage of its total revenues and
the district's solid reserves and liquidity position provide a sufficient
financial cushion. Spansion reportedly is current with its property tax payments
to the district.

The district is located approximately six miles east of downtown Austin, serving
a 170-square mile area that is largely unincorporated. Area wealth levels are
below average. More recently, growth trends in the district's enrollment base
have been affected by affordable land which spurred residential development as
well as the opening of toll road Highway 130. District enrollment now totals
just over 10,000 students and has grown recently at a solid 5% average annual
rate. Tax base growth has been solid although erratic, averaging 8% annually
over the past five years, remaining vulnerable to downturns in the technology
sector; at $3.1 billion, fiscal 2010 taxable assessed valuation (TAV) declined
modestly at about 2% from the prior year. Taxpayer concentration has declined
over time, but remains high with Advanced Micro Devices (AMD) and Spansion LLC
heading the top taxpayer list and contributing about 11% to the fiscal 2010 tax
base.

Finances remain a credit positive. The district again reported a strong
unreserved general fund balance of $29 million or roughly 40% of spending in
fiscal 2009, which remained well above its informal operating reserve policy of
maintaining no less than 20%. Liquidity is also substantial and reached $28
million or almost five months of cash on hand in fiscal 2009. A modest operating
deficit of approximately $2.5 million is budgeted in fiscal 2010, primarily due
to one-time capital expenditures. The district has no immediate plans to
approach voters for additional M&O tax rate increases.

While debt levels have declined somewhat, they remain high. Overall debt levels
approximate 7.2% of TAV or $5,300 on a per capita basis. Fitch anticipates debt
levels will remain elevated over the near term with continued capital pressures
from the district's solid enrollment growth trends. Amortization is slightly
above average at 54.2% of principal retired in 10 years. District officials
currently project issuance of the remaining $26 million portion from its 2007
authorization no earlier than the spring of 2010. Fitch believes the district
may be challenged to issue additional debt without further, strong tax base
growth as the district's debt service tax rate is currently approaching the
state attorney general's $0.50 per $100 TAV test for supporting new debt.

Additional information is available at www.fitchratings.com.

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Fitch Ratings, New York
Rebecca C. Moses, +1-512-215-3739 (Austin)
Jose Acosta, +1-512-215-3726 (Austin)
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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