DALLAS -A rapidly expanding economy and tax base coupled with a strong financial performance led Standard & Poor'sto upgrade the underlying credit of the Round Rock, Tex., Independent School District to AA from AA-minus.

Analysts said the outlook is stable and assigned the higher rating to the district's upcoming sale of $126.4 million of unlimited-tax general obligation bonds set for Tuesday. The upgrade also applies to about $405 million of outstanding debt.

"We're real excited about the upgrade, as it reflects the hard work and financial management of the district," said chief financial officer Tracy Hoke. "And because this deal doesn't qualify for the Permanent School Fund, it was absolutely important for us to get the highest rating possible."

Hoke said this sale by the district doesn't qualify for the triple-A enhancement provided by the state program due to the level of growth the district has experienced that pushed the debt-service coverage per student above the $1,250 maximum allowable under the program.

The total student population in the school system's 42 campuses is about 40,500. Enrollment had been climbing by nearly 1,200 to 1,500 students for a few years, but growth moderated to roughly 600 new students in 2007. A decade ago, the district served slightly more than 26,000 students.

Officials expect growth to continue, with enrollment reaching 45,000 in 2013, and the district is forming a bond advisory committee to consider another bond election for this November's ballot.

"We're just starting the process to study the economy, monitor growth indicators, and gauge the feasibility of another election," Hoke said. "We're certainly not going to call for another election if we don't think it will pass, as we don't want another failed election."

Voters approved a $267.7 million referendum in November 2006, but rejected a bond election in 2004.

Morgan Stanleyis lead manager for the underwriting syndicate of next week's negotiated sale. Proceeds will fund a new high school, renovations and additions to existing facilities, and technology upgrades across the district. The bonds are structured as serials reaching final maturity in 2033.

First SouthwestCo. is the financial adviser to the district, which is just north of Austin, and Vinson & Elkinsis bond counsel.

The district's taxable assessed value has averaged 6.4% annual growth over the past five years to $17.19 billion for fiscal 2008, according to analysts.

Standard & Poor's also said the district has posted operating surpluses in each of the past five fiscal years despite the pressures associated with rapid enrollment growth, which acts as a mitigating credit factor.

Following next week's issue, the district will have $38.2 million of authorized but unissued debt remaining from the bond package approved in 2006.

Moody's Investors Service rates the district's underlying credit Aa2. Fitch Ratingsdoesn't rate it.

Round Rock was home to less than 25,000 people in 1980, and about 61,100 in 2000. Now nearly 96,000 people live in the once rural community about 15 miles north of downtown Austin. Dell Computer Corp., which was founded in 1984, has its headquarters in Round Rock.

The Round Rock school district serves a total population nearly 190,000, drawing students from the cities of Round Rock, Austin, and Cedar Park. q

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