Moody's Investors Service has upgraded to A1 from A2 the underlying rating on Three Rivers Independent School District (TX) and assigned an A1 to the district's $14.22 million Unlimited Tax School Building Bonds, Series 2012. The upgrade to A1 affects $13.5 million in outstanding parity debt. In addition to the ratings, we have assigned a Aaa enhanced rating to the current sale reflecting the guarantee of the Texas Permanent School Fund (PSF). Proceeds from the sale of bonds will primarily be used to construct a new elementary school.

SUMMARY RATING RATIONALE - UNDERLYING

The bonds are payable from a continuing direct annual ad valorem tax levied by the district, without legal limit as to rate or amount, on all taxable property within the district. The rating upgrade reflects the district's significant tax base increase in fiscal 2013 while also taking into consideration the concentration in the oil and gas industry. The rating also reflects healthy reserve levels and moderate debt afforded by the new assessed valuation.

SUMMARY RATING RATIONALE - ENHANCED

In addition to the underlying rating, we have assigned a Aaa enhanced rating to the current sale provided by a guarantee of the Texas Permanent School Fund (PSF). The Aaa rating reflects our assessment of the PSF's ability to make payments on the guarantee relative to the substantial value of the fund corpus. Additional credit considerations include: the PSF's constitutionally protected corpus, the general obligation credit quality of the Texas school district guaranteed by the fund, an investment portfolio that provides satisfactory coverage and liquidity given our estimated probability of calls on the guarantee, and strong legal mechanics that facilitate timely reimbursement to the PSF should guarantee payments occur. The enhanced rating also reflects an expected increase in PSF leverage to no more than 3.5 times PSF cost value. For additional information on the PSF program, please see Moody's High Profile Ratings Update "Texas Permanent School Fund (PSF)" dated September 2011.

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