DALLAS - The Hidalgo County Drainage District No. 1in Texas received an upgrade from Standard & Poor's to AA-minus from A-plus as it prepares to issue $72 million of general obligation bonds Tuesday to strengthen levees on the Rio Grande.

About two weeks ago, the U.S. section of the International Boundary and Water Commission authorized the project, for which the district will use bond proceeds to raise a 3.7-mile levee in the city of Mission.

Godfrey Garza, director of the drainage district, said some proceeds will also fund expansion of the drainage system. Garza said the levee improvements are needed to bring the embankments into compliance with Federal Emergency Management Agency requirements.

FEMA mandated all entities that oversee levees to recertify them following the failure of the levees in New Orleansduring Hurricane Katrina in late August 2005.

The International Boundary and Water Commission is reviewing plans for additional work on the levees by the drainage district "and expects to approve the plans in the near future."

The commission is also in talks with the drainage district and the Department of Homeland Securityabout the potential construction of a combined levee-border wall in the county.

The construction of a fence along the 1,255-mile border formed by the Rio Grande between Texas and Mexico is a contentious project that has prompted numerous lawsuits and encountered political hurdles. There is also another 700 miles of the border in Arizona, New Mexico, and California.

In May 2006, the Senate approved a bill for construction of 370 miles of fence on the border. Later that year, the House passed a bill calling for 700 miles of fence on the U.S.-Mexico border.

Next week's competitive sale by the drainage district exhausts a $100 million authorization passed by Hidalgo County voters in November 2006. The bonds, which are expected to be insured, are secured by the ad valorem taxes collected by the drainage district.

Standard & Poor's analysts said the rapidly expanding tax base and continued strong finances of the district led to the upgrade. The higher rating applies to next week's sale and $25 million of debt outstanding. The outlook is stable.

"We assume economic growth within the district's service area will continue and that management will successfully complete the district's capital improvement plan," credit analyst Horacio Aldrete said. "We also believe district management will sustain its solid financial performance and position."

Estrada Hinojosa& Co. is the financial adviser to the district and Montalvo & Ramirezis bond counsel.

Most of the county's cities have experienced rapid growth this decade. At more than 70,000, the population of Edinburg, the county seat, is up 45% from 2000, while McAllen's population of nearly 130,000 represents a more than 20% gain from the 2000 Census. Mission is home to about 67,000, which is an increase of nearly 50% from 45,408 at the start of the decade.

Standard & Poor's said the assessed value of the drainage district averaged 10% annual growth the past five years to $22.7 billion for fiscal 2008.

Hidalgo County is one of the poorest in the nation with about 41% of the roughly 710,000 residents living in poverty, according to data from the Census Bureau.

Moody's Investors Service rates the drainage district at A1, and analysts expect the "existing debt profile will remain manageable ... given the district's sizable and increasing tax base and prudent debt management."

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