Fitch Rates Schertz, Texas' Series 2009 GOs 'AA-'; Outlook Stable

AUSTIN, Texas--(Business Wire)--
Fitch Ratings assigns an 'AA-' rating to Schertz, Texas' (the city) $9.5 million
general obligation (GO) and refunding bonds, series 2009. In addition, Fitch
affirms the approximately $33 million in certificates of obligation and $24
million in GO bonds outstanding at 'AA-'. The Rating Outlook is Stable.

Scheduled for a negotiated sale July 13, 2009 the bonds are direct obligations
of the city, payable from a limited ad valorem tax levied on all taxable
property in the city. Bond proceeds will finance a recreation center, street
improvements, refund a portion of the city's outstanding debt, and pay issuance
costs.

The 'AA-' rating reflects the city's sound financial profile and continued
economic growth, as well as its moderate capital needs and limited borrowing
plans. The city benefits from its location in the larger San Antonio metro area
and positioning near major transportation corridors. Continued gains in sales
tax revenues, albeit at lower levels, reflect a sound local and regional
economy. Reserve levels remain healthy, but have notably declined due to
substantial, one-time capital spending and are projected to decline further.
Nonetheless, the reserve level meets the city's formal policy of three months of
operating expenditures. Additional financial flexibility is provided by the
city's low property tax rate. Overall debt levels are high, driven primarily by
borrowings of the local school district. Fitch believes a principal challenge
for the city going forward will be preserving its healthy financial status while
adapting to changes in economic growth patterns.

The city is located roughly 15 miles east of downtown San Antonio and is part of
the sizeable San Antonio metro area. Two major highways cross the city, proving
advantageous in attracting warehouse and distribution oriented businesses. The
city has a 2008 estimated population of roughly 32,000, which represents a
robust 70% increase from 2000. In addition to warehouse and distribution
operations, the city's economy benefits from extensive retail activity along its
transportation corridors. Also, nearby Randolph Air Force Base is a positive
economic influence. Growth in taxable assessed valuation (TAV) accelerated over
the past several fiscal years, although reflecting the current economic
environment, fiscal 2009 TAV slowed to roughly 6% and preliminary taxable values
for fiscal 2010 indicate a comparable level of increase.

The city has managed to meet the service demands of a growing population while
maintaining a sound financial profile. Since fiscal 2003, the city maintained
very high levels of general fund reserves. Additional one-time capital spending
in fiscal 2008 significantly reduced reserves, even below the level predicted by
the city close to fiscal year end. Nonetheless, the fiscal 2008 unreserved
general fund balance at $5.7 million was still a solid 30.4% of spending.
Projected fiscal 2009 results show another fund balance reduction, again for
one-time capital spending, while retaining a good fund balance. However, Fitch
notes that reserve levels now are substantially lower than historic levels and
any further deterioration may be inconsistent with this rating level. City
officials have proactively taken mid-year measures to control operating
expenditures and preliminary planning for fiscal 2010 includes the expectation
of a balanced budget, the maintenance of reserves, as well as a possible
increase to the operations and maintenance property tax rate.

Overall debt levels are very high at approximately $7,300 per capita and
slightly more than 12% of fiscal 2009 TAV. The majority of overlapping debt is
that of Schertz-Cibolo-Universal City Independent School District (GO debt rated
'A+' by Fitch). The city's near-term borrowing needs presently are minimal, as
Schertz is focusing on completion of projects approved by voters in a 2006
election that authorized $37.5 million of GO bonds. This bond issue completes
this authorization. The pace of debt retirement is average at 49% 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, New York
Rebecca C. Moses, +1-512-215-3739 (Austin)
Andy Kaaz, +1-512-215-3730 (Austin)
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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