Fitch Upgrades Pilot Point ISD, Texas' GOs to 'BBB+'; Outlook Stable

NEW YORK--(Business Wire)--
As part of ongoing surveillance, Fitch Ratings has upgraded its rating to 'BBB+'
from 'BBB' on Pilot Point Independent School District (ISD), Texas' (the
district) approximately $19 million of outstanding unlimited tax school building
bonds, series 2003 and 2005 (the bonds). The Rating Outlook is Stable.

The rating upgrade recognizes the district's commitment to maintaining the
fiscal stability it has recently attained following a dramatic weakening in
financial position. The 'BBB+' rating further considers the district's
moderately high debt burden and slow principal amortization balanced against a
lack of additional capital needs or borrowing plans, a small tax base and fairly
limited local economy softened by the district's proximity to the broader
economic base of the Dallas-Ft. Worth metroplex. The district's ability to adopt
balanced spending plans that build toward its fund balance target is a key
rating driver, noting that the constraints of the state school funding formula
and flat enrollment expectations may strain resources going forward.

Fiscal 2009 represented a significant turn-around in the district's financial
health. The district posted a net surplus totaling $1.49 million, which improved
the unreserved fund balance to $1.65 million or 16.6% of total spending. The
keys to the turn-around include a new management team committed to maintaining
financial stability and the 13-cent increase to the maximum $1.17 per $100
maintenance and operation tax rate approved by voters in October 2008. The
increase resulted in additional funding of approximately $930,000 (one-third of
which was derived in the form of additional state matching funds) annually
beginning in fiscal 2009. The additional revenue has been allocated to rebuild
reserves, provide funds to meet rising operational costs, and improve the
competitiveness of teacher salaries. The fiscal 2010 budget adds approximately
$200,000 to the general fund balance. The district aims to gradually increase
reserves to 3 to 4 months of total spending.

Debt levels range toward the high side at $3,723 per capita and 5.5% of net
taxable value, and principal amortization is very slow (29% is repaid in 10
years). However, annual debt service charges are essentially level; therefore,
no further increase in the debt service tax rate is anticipated (assuming
constant to ascending tax base growth). The district reports no additional
borrowing plans or capital needs.

The district is located in the northern portion of Denton County, known for its
horse ranches, farming and recreational activities. Residents have access to the
broader and reasonably healthy Dallas-Fort Worth metro area economy. The
county's unemployment rate remains lower than the state and national average at
7.6% as of August 2009. Per capita income for the City of Pilot Point is
moderately below the state average. The district's average daily attendance
(ADA) has declined on average by 0.9% per year since 2005, with the sharpest
decline occurring at the height of the district's financial turmoil. District
officials anticipate ADA will stabilize but remain relatively flat over the next
several years.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings
Michael Rinaldi, +1-212-908-0833 (New York)
Jose Acosta, +1-512-215-3726 (Austin)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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