Fitch Rates Fort Bend ISD's (Texas) ULT 2009 Bonds 'AA'; Outlook Stable

AUSTIN, Texas--(Business Wire)--
Fitch Ratings assigns its 'AA' rating to Fort Bend Independent School District
(IDS), Texas' (the district) $175 million unlimited tax (ULT) school building
bonds, series 2009 and approximately $95.8 million unlimited tax refunding
bonds, series 2009, scheduled to sell via negotiation on July 9, 2009. In
addition, Fitch affirms its rating on the district's $740 million in outstanding
unlimited tax bonds (net of refunding) at 'AA'. The Rating Outlook is Stable.

Payment for the bonds is provided by an ad valorem tax levied, without legal
limitation as to rate or amount, against all taxable property within the
district. Bond proceeds will be used for new school construction and facility
renovations, to refund certain of the district's outstanding obligations for
debt service savings, and to pay issuance costs.

The 'AA' rating reflects the district's favorable financial management
practices, solid reserves, strong tax base, and substantial state support for
operations and capital construction. The rating also reflects the district's
very high overall debt levels due to ongoing growth-related capital needs of the
unincorporated portions of the district, including numerous overlapping
municipal utility districts (MUDs). High wealth levels and ongoing tax base
gains somewhat mitigate credit concerns over debt levels. Given ongoing
operating pressures associated with enrollment growth and the challenges imposed
by the state funding formula, maintenance of structurally balanced operations
with solid reserves is integral to the district's credit quality.

Located in northeastern Fort Bend County, the district is a rapidly growing
residential and commercial sector of the Houston metropolitan statistical area
(MSA). Along with continuing residential development, particularly in the
county's many master-planned communities, expanded high-technology development
has supplemented the county's historical base of mineral production,
manufacturing, and agriculture. As a result, taxable assessed valuation (TAV)
has nearly doubled over the last nine years to $23 billion in fiscal 2009, from
roughly $12 billion in fiscal 2002. Preliminary fiscal 2010 TAV estimates point
to more modest growth from the fiscal 2009 values.

The current offering represents the second installment of $428 million, the
district's largest bond package, approved by a wide margin at an election held
in November 2007. The district's current debt service tax rate of $0.23 per $100
TAV compares favorably to other school districts with similar growth pressures.
The voters were presented with the possibility of debt service tax rates
increasing to a maximum of $0.32 per $100 TAV to support the entire bond
program, and the district anticipates a modest three and a half cent increase to
the current tax rate as a result of this offering.

Direct debt is moderately high at over $2,200 per capita and nearly 4% of TAV
even after adjusting for state support for about 14% of the outstanding district
debt. Overlapping debt attributable to 46 entities (including many MUDs) is
substantial, totaling nearly $1.2 billion, increasing the district's overall
debt burden to over $5,000 per capita and nearly 9% of TAV. Debt service
carrying charges remain moderate at 11% of general and debt service funds in
fiscal 2008. Principal amortization is slow at 34% in 10 years, which is not
unusual for fast-growing school districts.

Despite the fast enrollment growth trend over the last few years, the district
has maintained strong financial operations due to extensive cost-containment
efforts and conservative revenue projections in the development of its annual
budgets. After several years of slight decreases in financial margins due to
planned drawdowns for one-time capital expenditures, the district added annually
to its operating reserves for five years from fiscal years 2003 to 2007. At the
close of fiscal 2007, the district maintained a solid unreserved general fund
balance totaling $107.4 million, or 25% of spending. For fiscal 2008, the
district posted a $9 million deficit due to lower than budgeted enrollment gains
and corresponding expenditure increases associated with staffing for the
expected larger student base. Despite this deficit, the district's unreserved
fund balance remained healthy at $93.4 million, or 19.7% of spending. The fiscal
2009 adopted budget assumed another $9.5 million drawdown; however, due to its
conservative assumptions and tight budgetary controls, the district now expects
to end the year with balanced results. The district's financial management staff
is working to close a $15 million preliminary budget deficit for fiscal 2010.
The preliminary budget is based on minimal enrollment growth.

Fort Bend County's population, estimated at 532,141 in 2008, has grown by 50%
since the 2000 census population count of 354,452. The population of Sugar Land,
the county's largest city, similarly grew by a rapid 26% to nearly 80,000 during
the same period. Growth in the county has been sustained by the continued
development of master-planned communities. Despite the slowdown in home sales,
the median home price in the Houston MSA has held steady at about $150,000 and
experienced very modest swings in prices since 2005. The county's unemployment
rate of 6% in April 2009 remains well below state and national averages of 6.4%
and 8.6%, respectively. Wealth levels of the county's population are notably
higher than those for the Houston MSA and state.

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
Gabriela Gutierrez, +1-512-215-3731 (Austin)
Andy Kaaz, +1-512-215-3730 (Austin)
Cindy Stoller, +1-212-908-0526
(Media Relations, New York)
cindy.stoller@fitchratings.com

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