$56,950,000 unlimited tax school building bonds, series 2006...yield comparison issuer issue...

Pricing Report

$56,950,000Unlimited Tax School

Building Bonds,Series 2006

ISSUER Laredo Independent School District

FINANCIAL ADVISOR Estrada Hinojosa & Company, Inc.

BOND COUNSEL Escamilla & Poneck, Inc.

UNDERWRITERS Senior Manager: JP Morgan Securities Inc.Co – Managers: A.G. Edwards & Sons, Inc.

Banc of America Securities LLCSAMCO Capital Markets, Inc.

UNDERWRITERS’ COUNSEL Winstead, Sechrest & Minick P.C.

PAYING AGENT Wells Fargo Bank Texas, N.A.

Financing Team

2

Project List*

Pre-K Elementary Classrooms 6,000,000$

Replacement of JC Martin Elementary School 8,592,446

Construction of Middle School 20,100,000

Alternative Education Campus & High School of Choice 10,307,554

Early College High School - Instructional Wing 3,000,000

Martin High School - Science Laboratories 3,000,000

Nixon High School - Science Laboratories 3,000,000

Cigarroa High School - Science Laboratories 3,000,000

Total 57,000,000$

*Project amounts provided by LISD prior to pricing.

3

Date of voter authorization: May 13, 2006

Par Amount: $56,950,000

TIC – 4.573%

Term of Bond: 23 years (2007 – 2029)

Insurance: Permanent School Fund (PSF) Ratings with Bond Insurance: Standard and Poor’s (AAA); Moody’s (Aaa); and Fitch (AAA)

Underlying Ratings: Standard and Poor’s (A); Moody’s (A3); and Fitch (A)

Pricing Summary

4

Yield ComparisonIssuerIssue UNLIMITED TAX SCHOOL UNLIMITED TAX REFUNDINGIssue BUILDING BONDS, SERIES 2006 BONDS, SERIES 2006

Amount $56,185,000 $118,020,000 Pricing Date

Insurance PSF PSFRating

Call FeatureDate Coupon Yield Coupon Yield Difference Coupon Yield Difference200520062007 4.250% 3.600% 4.000% 3.570% 0.030% 4.000% 3.620% -0.050%2008 4.250% 3.630% 4.000% 3.610% 0.020% 4.000% 3.620% 0.010%2009 4.250% 3.670% 4.000% 3.660% 0.010% 4.000% 3.640% 0.030%2010 4.250% 3.730% 4.000% 3.720% 0.010% 4.000% 3.680% 0.050%2011 4.250% 3.770% 4.000% 3.760% 0.010% 4.000% 3.730% 0.040%2012 4.250% 3.840% 4.000% 3.820% 0.020% 4.000% 3.790% 0.050%2013 4.250% 3.910% 4.000% 3.890% 0.020% 4.000% 3.860% 0.050%2014 4.250% 3.990% 4.000% 3.970% 0.020% 4.000% 3.950% 0.040%2015 5.000% 4.040% 4.000% 4.020% 0.020% 4.000% 4.020% 0.020%2016 5.000% 4.090% 5.250% 4.090% 0.000% 4.250% 4.070% 0.020%2017 4.125% 4.230% 4.125% 4.230% 0.000% 4.125% 4.170% 0.060%2018 4.200% 4.320% 4.200% 4.320% 0.000% 4.125% 4.250% 0.070%2019 4.250% 4.410% 4.250% 4.400% 0.010% 4.250% 4.300% 0.110%2020 5.000% 4.350% 5.000% 4.350% 0.000% 4.250% 4.400% -0.050%2021 4.500% 4.560% 5.000% 4.390% 0.170% 4.375% 4.480% 0.080%2022 4.500% 4.600% 5.000% 4.430% 0.170% 4.500% 4.560% 0.040%2023 4.500% 4.620% 5.000% 4.450% 0.170% 4.500% 4.580% 0.040%2024 4.500% 4.640% 5.000% 4.450% 0.190% 5.000% 4.440% 0.200%2025 4.500% 4.660% 5.000% 4.480% 0.180% 5.000% 4.600% 0.060%2026 4.500% 4.680% 5.000% 4.500% 0.180% 5.000% 4.480% 0.200%2027 5.000% 4.570% 5.250% N/A 5.000% 4.500% 0.070%2028 5.000% 4.570% 5.250% N/A 5.000% 4.520% 0.050%2029 5.000% 4.570% 5.250% N/A 5.000% 4.540% 0.030%2030 4.750% 4.750%20312032 4.750% 4.770%20332034 4.750% 4.780%20352036 4.750% 4.900%

Underlying Rating

A/A3/A

PSFAAA/Aaa/AAA

08/1/16 @ PAR @ 100 02/15/16 @ PAR @ 100

08/14/06$57,000,000

08/14/06

LAREDO ISDUNLIMITED TAX SCHOOL

BUILDING BONDS, SERIES 2006

MISSION CISD

AAA/Aaa/AAA AAA/Aaa/AAA

A-/A3/NR

08/14/06

NR/Aa3/NR

02/01/16 @ PAR @ 100

PASADENA ISD

5

Historical Analysis

Bond Buyer Indices 30-Year Treasury, 25-Revenue Bond Index, and 20-GO Bond Index

1997 - Present

4.00

4.25

4.50

4.75

5.00

5.25

5.50

5.75

6.00

6.25

6.50

6.75

7.00

7.25

1/1/

1997

6/1/

1997

11/1

/199

7

4/1/

1998

9/1/

1998

2/1/

1999

7/1/

1999

12/1

/199

9

5/1/

2000

10/1

/200

0

3/1/

2001

8/1/

2001

1/1/

2002

6/1/

2002

11/1

/200

2

4/1/

2003

9/1/

2003

2/1/

2004

7/1/

2004

12/1

/200

4

5/1/

2005

10/1

/200

5

3/1/

2006

8/1/

2006

Yie

ld (%

)

25 Revenue Bonds

30 Year Treasury Bonds

20 G.O Bonds

6

Debt Service Requirements

7

I & S Tax Rate Impact (PRE – 2006)

LAREDO INDEPENDENT SCHOOL DISTRICT PRE-2006Tax Rate Impact IFA =SUM([D]:[E]) =([D])* State AidE])* IFA State Aid =SUM([F]:[I]) =[J] ALL UNLIMITED TAX DEBT

COLLECTIONS RATE: 93.76% TIC: 4.57% IFA District Size Factor: 4,147,577$ Dated Date: 8/15/2006

Par Amount: 56,950,000$ 78.89% 78.89% 3,841,472$

2006 1,723,802,592$ 13,744,029$ -$ 13,744,029$ (10,766,222)$ (409,267)$ 2,568,540$ 0.1712 20062007 1,787,579,927 3.7% 13,620,491 13,620,491 (10,639,025) - 2,981,466 0.1779 0.0067 2007 UNDER2008 1,787,579,927 0.0% 15,019,791 15,019,791 (11,849,293) - 3,170,499 0.1892 0.0113 2008 UNDER2009 1,787,579,927 0.0% 15,011,260 15,011,260 (11,842,562) - 3,168,698 0.1891 2009 UNDER2010 1,787,579,927 0.0% 15,002,098 15,002,098 (11,835,334) - 3,166,764 0.1889 2010 UNDER2011 1,787,579,927 0.0% 14,983,603 14,983,603 (11,820,743) - 3,162,860 0.1887 2011 UNDER2012 1,787,579,927 0.0% 14,966,703 14,966,703 (11,807,410) - 3,159,292 0.1885 2012 UNDER2013 1,787,579,927 0.0% 14,949,828 14,949,828 (11,794,097) - 3,155,730 0.1883 2013 UNDER2014 1,787,579,927 0.0% 14,936,869 14,936,869 (11,783,874) - 3,152,995 0.1881 2014 UNDER2015 1,787,579,927 0.0% 14,914,488 14,914,488 (11,766,217) - 3,148,270 0.1878 2015 UNDER2016 1,787,579,927 0.0% 14,911,519 14,911,519 (11,763,875) - 3,147,644 0.1878 2016 UNDER2017 1,787,579,927 0.0% 14,906,163 14,906,163 (11,759,650) - 3,146,513 0.1877 2017 UNDER2018 1,787,579,927 0.0% 14,901,169 14,901,169 (11,755,710) - 3,145,459 0.1877 2018 UNDER2019 1,787,579,927 0.0% 14,895,438 14,895,438 (11,751,188) - 3,144,249 0.1876 2019 UNDER2020 1,787,579,927 0.0% 14,890,500 14,890,500 (11,747,293) - 3,143,207 0.1875 2020 UNDER2021 1,787,579,927 0.0% 14,865,750 14,865,750 (11,727,768) - 3,137,982 0.1872 2021 UNDER2022 1,787,579,927 0.0% 14,887,500 14,887,500 (11,744,926) - 3,142,574 0.1875 2022 UNDER2023 1,787,579,927 0.0% 14,897,500 14,897,500 (11,752,816) - 3,144,684 0.1876 2023 UNDER2024 1,787,579,927 0.0% 14,910,000 14,910,000 (11,762,677) - 3,147,323 0.1878 2024 UNDER2025 1,787,579,927 0.0% 9,704,000 9,704,000 (7,655,601) - 2,048,399 0.1222 2025 UNDER2026 1,787,579,927 0.0% 4,569,500 4,569,500 (3,604,933) - 964,567 0.0576 2026 UNDER2027 1,787,579,927 0.0% 4,564,500 4,564,500 (3,600,989) - 963,511 0.0575 2027 UNDER2028 1,787,579,927 0.0% 4,566,750 4,566,750 (3,602,764) - 963,986 0.0575 2028 UNDER2029 1,787,579,927 0.0% 4,564,500 4,564,500 (3,600,989) - 963,511 0.0575 2029 UNDER2030 1,787,579,927 0.0% 4,567,500 4,567,500 (3,603,355) - 964,145 0.0575 2030 UNDER2031 1,787,579,927 0.0% - - - - - 0.0000 2031 UNDER2032 1,787,579,927 0.0% - - - - - 0.0000 2032 UNDER2033 1,787,579,927 0.0% - - - - 0.0000 2033 UNDER2034 1,787,579,927 0.0% - - - - 0.0000 2034 UNDER2035 1,787,579,927 0.0% - - - - 0.0000 2035 UNDER2036 1,787,579,927 0.0% - - - - 0.0000 2036 UNDER2037 1,787,579,927 0.0% - - - - 0.0000 2037 UNDER

Total 313,751,445$ -$ 313,751,445$ (247,339,310)$ -$ (409,267)$ 66,002,867$ Total

(1) Collection Rate - 90.00%

2006U/L Tax Sch Bldg Bonds

Debt Service Total Debt

Marginal I&S Tax

Rate Increase

Less:District

Contribution

2006 MAX DEBT

SERVICE TEST

FYE8/31

FYE8/31

Less: Projected Aid on Existing

Debt

Total Net Debt Service

Requirements

Required Tax Rate

(1)

[NAV]Net Assessed

ValuationNAV

Growth

Less: Projected IFA Aid on Series

2006Existing Debt

8

I & S Tax Rate Impact (FINAL PRICING)

LAREDO INDEPENDENT SCHOOL DISTRICT [08/14/06, 3:45PM] FINAL PRICINGTax Rate Impact IFA =SUM([D]:[E]) =([D])* State AidE])* IFA State Aid =SUM([F]:[I]) =[J] STAND-ALONE INCREASE


Par Amount: 56,950,000$ 78.89% 78.89%

2006 1,723,802,592$ -$ -$ -$ -$ 20062007 1,787,579,927 3.7% 4,074,803 4,074,803 - (3,214,661) 860,142 0.0513 0.0513 2007 UNDER2008 1,787,579,927 0.0% 4,068,599 4,068,599 - (3,209,766) 858,833 0.0512 2008 UNDER2009 1,787,579,927 0.0% 4,068,149 4,068,149 - (3,209,411) 858,738 0.0512 2009 UNDER2010 1,787,579,927 0.0% 4,069,936 4,069,936 - (3,210,821) 859,115 0.0513 2010 UNDER2011 1,787,579,927 0.0% 4,068,749 4,068,749 - (3,209,884) 858,864 0.0512 2011 UNDER2012 1,787,579,927 0.0% 4,069,586 4,069,586 - (3,210,545) 859,041 0.0513 2012 UNDER2013 1,787,579,927 0.0% 4,067,236 4,067,236 - (3,208,691) 858,545 0.0512 2013 UNDER2014 1,787,579,927 0.0% 4,066,699 4,066,699 - (3,208,267) 858,432 0.0512 2014 UNDER2015 1,787,579,927 0.0% 4,067,761 4,067,761 - (3,209,105) 858,656 0.0512 2015 UNDER2016 1,787,579,927 0.0% 4,069,761 4,069,761 - (3,210,683) 859,078 0.0513 2016 UNDER2017 1,787,579,927 0.0% 4,071,511 4,071,511 - (3,212,064) 859,447 0.0513 2017 UNDER2018 1,787,579,927 0.0% 4,067,668 4,067,668 - (3,209,031) 858,636 0.0512 2018 UNDER2019 1,787,579,927 0.0% 4,068,338 4,068,338 - (3,209,560) 858,777 0.0512 2019 UNDER2020 1,787,579,927 0.0% 4,068,575 4,068,575 - (3,209,747) 858,828 0.0512 2020 UNDER2021 1,787,579,927 0.0% 4,070,075 4,070,075 - (3,210,931) 859,144 0.0513 2021 UNDER2022 1,787,579,927 0.0% 4,068,575 4,068,575 - (3,209,747) 858,828 0.0512 2022 UNDER2023 1,787,579,927 0.0% 4,071,675 4,071,675 - (3,212,193) 859,482 0.0513 2023 UNDER2024 1,787,579,927 0.0% 4,068,925 4,068,925 - (3,210,023) 858,902 0.0512 2024 UNDER2025 1,787,579,927 0.0% 4,070,325 4,070,325 - (3,211,128) 859,197 0.0513 2025 UNDER2026 1,787,579,927 0.0% 4,070,425 4,070,425 - (3,211,207) 859,218 0.0513 2026 UNDER2027 1,787,579,927 0.0% 4,069,000 4,069,000 - (3,210,083) 858,917 0.0512 2027 UNDER2028 1,787,579,927 0.0% 4,068,250 4,068,250 - (3,209,491) 858,759 0.0512 2028 UNDER2029 1,787,579,927 0.0% 4,068,750 4,068,750 - (3,209,885) 858,865 0.0512 2029 UNDER2030 1,787,579,927 0.0% - - - - 0.0000 2030 UNDER2031 1,787,579,927 0.0% - - - - 0.0000 2031 UNDER2032 1,787,579,927 0.0% - - - - 0.0000 2032 UNDER2033 1,787,579,927 0.0% - - - - 0.0000 2033 UNDER2034 1,787,579,927 0.0% - - - - 0.0000 2034 UNDER2035 1,787,579,927 0.0% - - - - 0.0000 2035 UNDER2036 1,787,579,927 0.0% - - - - 0.0000 2036 UNDER2037 1,787,579,927 0.0% - - - 0.0000 2037 UNDER

Total -$ 93,593,370$ 93,593,370$ -$ (73,836,927)$ -$ 19,756,443$ Total




Marginal I&S Tax

Rate Increase

Less:District

Contribution

2006 MAX DEBT

SERVICE TEST

FYE8/31

FYE8/31

Less: Projected Aid

on Existing Debt


Requirements

Required Tax Rate

(1)

[NAV]Net Assessed

ValuationNAV

Growth


2006Existing Debt

9

I & S Tax Rate Impact (TOTAL)LAREDO INDEPENDENT SCHOOL DISTRICT [08/14/06, 3:45PM] FINAL PRICINGTax Rate Impact IFA =SUM([D]:[E]) =([D])* State AidE])* IFA State Aid =SUM([F]:[I]) =[J] ALL UNLIMITED TAX DEBT


Par Amount: 56,950,000$ 78.89% 78.89% 3,841,472$

2006 1,723,802,592$ 13,744,029$ -$ 13,744,029$ (10,766,222)$ (409,267)$ 2,568,540$ 0.1712 20062007 1,787,579,927 3.7% 13,620,491 4,074,803 17,695,294 (10,639,025) (3,214,661) 3,841,609 0.2292 0.0580 2007 UNDER2008 1,787,579,927 0.0% 15,019,791 4,068,599 19,088,390 (11,849,293) (3,209,766) 4,029,331 0.2404 0.0112 2008 UNDER2009 1,787,579,927 0.0% 15,011,260 4,068,149 19,079,409 (11,842,562) (3,209,411) 4,027,435 0.2403 2009 UNDER2010 1,787,579,927 0.0% 15,002,098 4,069,936 19,072,034 (11,835,334) (3,210,821) 4,025,879 0.2402 2010 UNDER2011 1,787,579,927 0.0% 14,983,603 4,068,749 19,052,351 (11,820,743) (3,209,884) 4,021,724 0.2400 2011 UNDER2012 1,787,579,927 0.0% 14,966,703 4,069,586 19,036,289 (11,807,410) (3,210,545) 4,018,333 0.2398 2012 UNDER2013 1,787,579,927 0.0% 14,949,828 4,067,236 19,017,064 (11,794,097) (3,208,691) 4,014,275 0.2395 2013 UNDER2014 1,787,579,927 0.0% 14,936,869 4,066,699 19,003,568 (11,783,874) (3,208,267) 4,011,426 0.2393 2014 UNDER2015 1,787,579,927 0.0% 14,914,488 4,067,761 18,982,249 (11,766,217) (3,209,105) 4,006,926 0.2391 2015 UNDER2016 1,787,579,927 0.0% 14,911,519 4,069,761 18,981,280 (11,763,875) (3,210,683) 4,006,722 0.2391 2016 UNDER2017 1,787,579,927 0.0% 14,906,163 4,071,511 18,977,674 (11,759,650) (3,212,064) 4,005,960 0.2390 2017 UNDER2018 1,787,579,927 0.0% 14,901,169 4,067,668 18,968,836 (11,755,710) (3,209,031) 4,004,095 0.2389 2018 UNDER2019 1,787,579,927 0.0% 14,895,438 4,068,338 18,963,775 (11,751,188) (3,209,560) 4,003,027 0.2388 2019 UNDER2020 1,787,579,927 0.0% 14,890,500 4,068,575 18,959,075 (11,747,293) (3,209,747) 4,002,034 0.2388 2020 UNDER2021 1,787,579,927 0.0% 14,865,750 4,070,075 18,935,825 (11,727,768) (3,210,931) 3,997,127 0.2385 2021 UNDER2022 1,787,579,927 0.0% 14,887,500 4,068,575 18,956,075 (11,744,926) (3,209,747) 4,001,401 0.2387 2022 UNDER2023 1,787,579,927 0.0% 14,897,500 4,071,675 18,969,175 (11,752,816) (3,212,193) 4,004,166 0.2389 2023 UNDER2024 1,787,579,927 0.0% 14,910,000 4,068,925 18,978,925 (11,762,677) (3,210,023) 4,006,225 0.2390 2024 UNDER2025 1,787,579,927 0.0% 9,704,000 4,070,325 13,774,325 (7,655,601) (3,211,128) 2,907,596 0.1735 2025 UNDER2026 1,787,579,927 0.0% 4,569,500 4,070,425 8,639,925 (3,604,933) (3,211,207) 1,823,785 0.1088 2026 UNDER2027 1,787,579,927 0.0% 4,564,500 4,069,000 8,633,500 (3,600,989) (3,210,083) 1,822,429 0.1087 2027 UNDER2028 1,787,579,927 0.0% 4,566,750 4,068,250 8,635,000 (3,602,764) (3,209,491) 1,822,745 0.1088 2028 UNDER2029 1,787,579,927 0.0% 4,564,500 4,068,750 8,633,250 (3,600,989) (3,209,885) 1,822,376 0.1087 2029 UNDER2030 1,787,579,927 0.0% 4,567,500 - 4,567,500 (3,603,355) - 964,145 0.0575 2030 UNDER2031 1,787,579,927 0.0% - - - - - - 0.0000 2031 UNDER2032 1,787,579,927 0.0% - - - - - - 0.0000 2032 UNDER2033 1,787,579,927 0.0% - - - - - 0.0000 2033 UNDER2034 1,787,579,927 0.0% - - - - - 0.0000 2034 UNDER2035 1,787,579,927 0.0% - - - - - 0.0000 2035 UNDER2036 1,787,579,927 0.0% - - - - - 0.0000 2036 UNDER2037 1,787,579,927 0.0% - - - - - 0.0000 2037 UNDERTotal 313,751,445$ 93,593,370$ 407,344,815$ (247,339,310)$ (73,836,927)$ (409,267)$ 85,759,311$ Total


FYE8/31

FYE8/31

Less: Projected Aid on Existing

Debt


Requirements

Required Tax Rate

(1)

[NAV]Net Assessed

ValuationNAV

Growth


2006Existing Debt



Marginal I&S Tax

Rate Increase

Less:District

Contribution

2006 MAX DEBT

SERVICE TEST

10

Aug 14, 2006 4:25 pm Prepared by Estrada Hinojosa & Company, Inc. (Finance 5.015 Laredo_ISD04:ZZ_ZZ06G-Z06E) Page 5

BOND DEBT SERVICE

Laredo Independent School DistrictU/L Tax School Building Bonds, Series 2006--FINAL PRICING #s: 08/14/2006, 4:30PM--

Dated Date 08/15/2006Delivery Date 09/28/2006

Period AnnualEnding Principal Coupon Interest Debt Service Debt Service

09/28/200602/01/2007 1,196,928.59 1,196,928.5908/01/2007 1,580,000 4.250% 1,297,874.38 2,877,874.3808/31/2007 4,074,802.9702/01/2008 1,264,299.38 1,264,299.3808/01/2008 1,540,000 4.250% 1,264,299.38 2,804,299.3808/31/2008 4,068,598.7502/01/2009 1,231,574.38 1,231,574.3808/01/2009 1,605,000 4.250% 1,231,574.38 2,836,574.3808/31/2009 4,068,148.7502/01/2010 1,197,468.13 1,197,468.1308/01/2010 1,675,000 4.250% 1,197,468.13 2,872,468.1308/31/2010 4,069,936.2502/01/2011 1,161,874.38 1,161,874.3808/01/2011 1,745,000 4.250% 1,161,874.38 2,906,874.3808/31/2011 4,068,748.7502/01/2012 1,124,793.13 1,124,793.1308/01/2012 1,820,000 4.250% 1,124,793.13 2,944,793.1308/31/2012 4,069,586.2502/01/2013 1,086,118.13 1,086,118.1308/01/2013 1,895,000 4.250% 1,086,118.13 2,981,118.1308/31/2013 4,067,236.2502/01/2014 1,045,849.38 1,045,849.3808/01/2014 1,975,000 4.250% 1,045,849.38 3,020,849.3808/31/2014 4,066,698.7502/01/2015 1,003,880.63 1,003,880.6308/01/2015 2,060,000 5.000% 1,003,880.63 3,063,880.6308/31/2015 4,067,761.2502/01/2016 952,380.63 952,380.6308/01/2016 2,165,000 5.000% 952,380.63 3,117,380.6308/31/2016 4,069,761.2502/01/2017 898,255.63 898,255.6308/01/2017 2,275,000 4.125% 898,255.63 3,173,255.6308/31/2017 4,071,511.2502/01/2018 851,333.75 851,333.7508/01/2018 2,365,000 4.200% 851,333.75 3,216,333.7508/31/2018 4,067,667.5002/01/2019 801,668.75 801,668.7508/01/2019 2,465,000 4.250% 801,668.75 3,266,668.7508/31/2019 4,068,337.5002/01/2020 749,287.50 749,287.5008/01/2020 2,570,000 5.000% 749,287.50 3,319,287.5008/31/2020 4,068,575.0002/01/2021 685,037.50 685,037.5008/01/2021 2,700,000 4.500% 685,037.50 3,385,037.5008/31/2021 4,070,075.0002/01/2022 624,287.50 624,287.5008/01/2022 2,820,000 4.500% 624,287.50 3,444,287.5008/31/2022 4,068,575.0002/01/2023 560,837.50 560,837.50

11

Aug 14, 2006 4:25 pm Prepared by Estrada Hinojosa & Company, Inc. (Finance 5.015 Laredo_ISD04:ZZ_ZZ06G-Z06E) Page 6

BOND DEBT SERVICE

Laredo Independent School DistrictU/L Tax School Building Bonds, Series 2006--FINAL PRICING #s: 08/14/2006, 4:30PM--

Period AnnualEnding Principal Coupon Interest Debt Service Debt Service

08/01/2023 2,950,000 4.500% 560,837.50 3,510,837.5008/31/2023 4,071,675.0002/01/2024 494,462.50 494,462.5008/01/2024 3,080,000 4.500% 494,462.50 3,574,462.5008/31/2024 4,068,925.0002/01/2025 425,162.50 425,162.5008/01/2025 3,220,000 4.500% 425,162.50 3,645,162.5008/31/2025 4,070,325.0002/01/2026 352,712.50 352,712.5008/01/2026 3,365,000 4.500% 352,712.50 3,717,712.5008/31/2026 4,070,425.0002/01/2027 277,000.00 277,000.0008/01/2027 3,515,000 5.000% 277,000.00 3,792,000.0008/31/2027 4,069,000.0002/01/2028 189,125.00 189,125.0008/01/2028 3,690,000 5.000% 189,125.00 3,879,125.0008/31/2028 4,068,250.0002/01/2029 96,875.00 96,875.0008/01/2029 3,875,000 5.000% 96,875.00 3,971,875.0008/31/2029 4,068,750.00

56,950,000 36,643,370.47 93,593,370.47 93,593,370.47

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Standard and Poor’s (A)

Moody’s (A3)

Fitch (A)

Rating Reports

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RESEARCHSummary: Laredo Independent School District, Texas; General Obligation; School State ProgramPublication date: 10-Aug-2006Primary Credit Analyst: Timothy Barrett, New York (1) 212-438-6327;

mailto:[email protected] Credit Analyst: Horacio Aldrete-Sanchez, Dallas (1) 214-871-1426;

mailto:[email protected]

Rationale

Credit Profile

US$57. mil unltd tax sch bldg bnds ser 2006 dtd 08/15/2006 due 08/01/2036 AAASale date: 14-AUG-2006

AFFIRMED$4.000 mil. Laredo Indpt Sch Dist GO (FSA) AAA/A(SPUR)$129.430 mil. Laredo Indpt Sch Dist PSF AAA

OUTLOOK: STABLE

Standard & Poor's Ratings Services assigned its 'AAA' enhanced program rating and 'A' issuer credit rating (ICR), and stable outlook, to Laredo Independent School District, Texas' series 2006 unlimited-tax GO school building bonds and affirmed its 'AAA' enhanced program rating and 'A' ICR, and stable outlook, on the district's preexisting GO debt.

Standard & Poor's also affirmed its 'A' Standard & Poor's underlying rating (SPUR), and stable outlook, on the district's public property finance contractual obligations.

The enhanced rating reflects the security provided by the Texas Permanent School Fund.

The ICR and SPUR reflect the district's:

Location in the Laredo MSA, which serves as a major international trade center; Strong state support for operations and debt service; and Sound financial position despite a high debt burden and additional capital needs.

These strengths are offset by the district's:

Low wealth and income levels, and High overall debt burden.

An unlimited ad valorem property tax pledge secures the bonds. District officials will use bond proceeds to finance the construction of a new middle school, a new high school, and permanent K-3 classrooms that will replace portable classrooms.

The 14-square-mile Laredo Independent School District, with about 105,669 residents, is entirely within Laredo, Texas ('A+' SPUR, GO debt rating), which is located along the main trade corridor of the U.S.-Mexico border. The district serves an estimated student enrollment of 23,174 for fiscal 2006 at 20

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Outlook

Debt

elementary schools, four middle schools, and four high schools. Enrollment has grown by an average of almost 2% annually since fiscal 2000. Due to the district's relative maturity, management expects additional enrollment growth to remain a modest 1%-2% annually.

The city's 15.00% employment growth over the past five years outpaced labor force growth and reduced the historically above-average unemployment rate to 5.65% in 2005, which was just slightly higher than state and national rates. The district's $1.94 billion fiscal 2007 property tax base is moderately concentrated with the 10 leading taxpayers accounting for 13% of total assessed value. Assessed value growth has historically averaged a modest 2.0%-3.0% annually since 2000 -- the exception was a 12.6% increase in fiscal 2005 due to some revaluations and strong commercial redevelopment in downtown Laredo. District wealth levels remain well below average: Market value is below $20,000 per capita and the city's per capita effective buying income indicator is just 54% of the national average.

Laredo Independent School District's financial position is sound. Steady enrollment increases and strong property tax base growth in 2005 have helped the district build sound reserves. The $19.8 million unreserved general fund balance at fiscal year-end 2005 equaled about 12% of operating expenditures; the total $28.8 million fund balance was roughly 17% of expenditures. In fiscal 2006, district officials will draw down reserves with a planned $5 million of onetime capital expenditures to supplement the construction and rehabilitation of school buildings. After the drawdown, they are projecting an adequate unreserved fund balance at 8.7% of expenditures, which management plans to increase in subsequent fiscal years given the board's policy to maintain a minimum of two months' operating expenditures in reserve. The adopted fiscal 2007 budget is balanced based on conservative revenue estimations and the use of the additional four cents of maintenance taxes permitted under House Bill 1 of the 2006 Texas school financing reform provisions.

Laredo Independent School District's management practices are considered good under Standard & Poor's financial management assessment (FMA) methodology, indicating practices are deemed currently good but not comprehensive. In addition to a formal fund balance policy, key items include monthly fiscal presentations to the board that track revenues, expenditures, and investment performance. Management, however, does not have a formal capital improvement plan or debt management policy that extends beyond state guidelines.

The stable outlook on the enhanced program rating reflects the Texas Permanent School Fund's strength and stability. The stable outlook on the ICR and SPUR reflects the expectation that district officials have reasonably identified all major capital requirements and that continued prudent financial management and strong state support will allow the district to manage its high debt burden. Historically, stable economic and student enrollment growth also lend stability to the rating.

Laredo Independent School District is currently receiving instructional facilities allotment and Tier III funding, which pays for almost 80% of its GO debt service requirement, excluding public property finance contractual obligations. Despite the substantial state aid for GO debt service, the overall net debt burden, assuming the same state support, is still considered a high 9.5% of market value. Over the past six years, the district had undertaken an extensive rehabilitation and modernization of its school facilities, issuing more than $200 million of debt before this issuance. According to management, this $57 million authorization should complete its capital program; therefore, management does not plan to go back to the electorate for at least the next five years. Officials, however, intend to issue roughly $12 million of TANs later this year to fund seasonal cash flow shortfalls.

Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.

Analytic services provided by Standard & Poor's Ratings Services (Ratings Services) are the result of separate activities designed to preserve the independence and objectivity of ratings opinions. The credit



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ratings and observations contained herein are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. Accordingly, any user of the information contained herein should not rely on any credit rating or other opinion contained herein in making any investment decision. Ratings are based on information received by Ratings Services. Other divisions of Standard & Poor's may have information that is not available to Ratings Services. Standard & Poor's has established policies and procedures to maintain the confidentiality of non-public information received during the ratings process. Ratings Services receives compensation for its ratings. Such compensation is normally paid either by the issuers of such securities or third parties participating in marketing the securities. While Standard & Poor's reserves the right to disseminate the rating, it receives no payment for doing so, except for subscriptions to its publications. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

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Global Credit ResearchNew Issue

7 AUG 2006

New Issue: Laredo Independent School District, TX

MOODY'S ASSIGNS Aaa RATING TO LAREDO ISD (TX) $57 MILLION UNLIMITED TAX SCHOOL BUILDINGBONDS, SERIES 2006

A3 UNDERLYING RATING AFFECTS $269 MILLION IN PARITY DEBT, INCLUDING CURRENT ISSUE

Primary & Secondary EducationTX

Moody's Rating

Opinion

NEW YORK, Aug 7, 2006 -- Moody's Investors Service has assigned a Aaa rating to Laredo IndependentSchool District's $57 million General Obligation Bonds, Series 2006. Prime credit quality is provided by aguarantee of the Texas Permanent School Fund (PSF) for timely payment of principal and interest in theevent that the school district is unable to meet debt service requirements. Sizable PSF assets andconservative program regulations provide strong bondholder protection. Moody's believes the limitationsplaced upon the PSF's actual leverage remain conservative and consistent with this highest of ratings.

State statutes provide for the advancement of revenues by the PSF from their cash reserves, prior to default,sufficient to meet a school district's debt service obligations should the district be unable to make timelypayment. These funds will, in turn, be intercepted from the District's next state aid allocation until fullrepayment, as either a lump sum or installment payment, to the PSF. For additional information on the PSFprogram please see Moody's Special Comment "Moody's Affirms The Aaa Rating for Texas PermanentSchool Fund Guarantee" dated August 2005.

At the same time, Moody's has assigned an A3 underlying rating to the current $57 million sale. The District'soutstanding debt was recently affirmed at A3 on July 10, 2006. The bonds are secured by an unlimited advalorem tax levied against all taxable property within the District. The A3 rating takes into consideration theDistrict's sizable and growing tax base, high debt levels that are somewhat supported by State aid, andsatisfactory financial operations.

MODERATE GROWTH DRIVEN BY LOCATION IN SOUTH TEXAS

Located in Webb County (Moody's rated A2), the District is located in south Texas and serves the central partof the City of Laredo (Moody's rated A2). Although population in the City grew 44% between 1990 and 2000,the population of the District only grew 6.4% over this same period. The slower population growth representsthe slower growth occurring in the District relative to the local area. The tax base is large, however, at $1.7billion for fiscal 2006 and has experienced healthy growth of 5.9% annually for the last five years. Growth isdriven by an equal mix of new construction and reevaluations. New construction is occurring in residentialand retail developments. In 2005, the tax base had a substantial increase of 18% due to a change inownership of a medical center facility. Enrollment growth has been a moderate 1.5% annually over the lastfive years given that most of the new growth in the City is taking place in a neighboring school district. TheDistrict's wealth levels are low with a 2000 per capita income of $9,046, which is a minimal 46.1% of theState and 41.9% of the Nation. Growth in the PCI has not kept pace with the State given that the State's PCIgrew 52% relative to the District's 46% increase between 1990 and 2000. Moody's believes the tax base willcontinue to see moderate growth and that enrollment will follow historical trends.

DEBT BURDENS HIGH DESPITE SIGNIFICANT STATE AID

The District's debt burdens are substantially mitigated by State assistance which supports approximately80% of total debt service requirements for unlimited tax debt and lease revenue bonds issued by the Laredo

ISSUE UNDERLYINGRATING RATING

Umlimited Tax School Building Bonds, Series 2006 A3 Aaa

Sale Amount $57,000,000

Expected Sale Date 08/15/06

Rating Description TEXAS PSF GUARANTEE

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ISD Public Facility Corporation. Including debt from the facility corporation and State assistance, the debtburdens are high at 4.6% on a direct basis and 10.1% on an overall basis. Without State assistance, the debtburdens increase to an elevated 17.2% direct and 23% overall. Debt is schedule for average retirement with47% of principal repaid in ten years. After the current sale, the District will have no authorized but unissueddebt remaining. Moody's believes the District's debt burdens will remain high; however, we also recognizethe significant amount of State aid that helps to support annual debt service requirements.

SATISFACTORY GENERAL FUND RESERVE LEVEL

District officials were successful in building the General Fund balance over several years and then used thefund balance in 2005 for some one time capital needs. The total fund balance increased from $14.2 million,or 10.7% of General Fund revenues in fiscal 2000 to $35.2 million, or 19.9% of General Fund revenues infiscal 2004. Annual surpluses were attributable to tightened expenditure controls and conservative budgeting.In 2005, the total fund balance decreased by $6.4 million to $28.7 million, or 16.8% of General Fundrevenues. Given that the total fund balance has consistently held reserves for capital projects, Moody's notesthat the unreserved portion of the fund balance has remained close to the $12 million level and in fiscal 2005,the $12.1 million unreserved balance equals 8.6% of General Fund revenues. Although the unreservedportion of the fund balance is relatively narrow, it still provides an adequate contingency reserve consistentwith the A3 rating. Additionally, Moody's believes the fund balance is satisfactory given that the Statesupports a strong 80% of General Fund operations.

On February 1, 2003 the District secured additional financial flexibility when voters approved an increase inthe tax rate limitation from $13.50 per $1,000 assessed valuation to the State maximum of $15.00 per $1,000assessed valuation. Under the old State funding formula, the District had substantial tax margin and Moody'sbelieves the new State funding program will continue to provide substantial support for the District'soperations.

KEY STATISTICS:

Enrollment: 22,500

2006 Full valuation: $1.7 billion

Full value per capita: $16,736

2000 Per Capita Income: $9,046 (46.1% of State)

Direct debt burden: 4.6%; without State assistance: 17.2%

Overall debt burden: 10.1%; without State assistance: 23.0%

Payout of Principal (10 years): 47.3%

2005 Undesignated General Fund balance: $12.1 million (8.6% of General Fund revenues)

Analysts

Kristin ButtonAnalystPublic Finance GroupMoody's Investors Service

Gera M. McGuireBackup AnalystPublic Finance GroupMoody's Investors Service

Contacts

Journalists: (212) 553-0376Research Clients: (212) 553-1653

© Copyright 2006, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.(together, "MOODY'S"). All rights reserved.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY

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FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered by it fees ranging from $1,500 to $2,400,000. Moody's Corporation (MCO) and its wholly-owned credit rating agency subsidiary, Moody's Investors Service (MIS), also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually on Moody's website at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy." This credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You should, before acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial situation and needs.

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Public Finance

August 10, 2006

www.fitchratings.com

Tax Supported New Issue

Laredo Independent School District, Texas

Ratings New Issue Unlimited Tax School Building

Bonds, Series 2006* ......................... AAA

Outstanding Debt Unlimited Tax Bonds............................ A Public Property Finance

Contractual Obligations .................... A Lease Revenue Bonds........................... A

Rating Outlook ..................................... Stable (Revised from Positive on 7/7/06) *The ‘AAA’ rating is based on the guaranty provided by the Texas Permanent School Fund, whose insurer financial strength is rated ‘AAA’ by Fitch Ratings. The underlying rating reflecting the credit quality without the guaranty is ‘A’.

Analysts Mark Campa +1 512 215-3730 [email protected] José Acosta +1 512 215-3726 [email protected]

Issuer Contact Jesus Amezcua Director of Finance +1 956 795-3200 [email protected]

New Issue Details $57,000,000 Unlimited Tax School Building Bonds, Series 2006, are scheduled to price the week of Aug. 14 via a syndicate led by JP Morgan. Dated Aug. 15, 2006, the bonds will be issued as a combination of current interest and capital appreciation bonds and are subject to optional redemption as prescribed in the offering statement. Security: Bonds are secured by an unlimited tax pledge of the district as well as a guaranty provided by the Texas Permanent School Fund. Purpose: Bond proceeds will be used for the construction, acquisition, and equipping of schools; to purchase school sites; and to pay costs of issuance

Outlook The underlying ‘A’ rating reflects the Laredo Independent School District’s (Laredo ISD, the district) adequate but narrowed financial position, substantial state support for operations and capital construction, and recent notable property tax base growth. The district’s financial reserves have thinned as a result of planned capital outlays as well as past large salary increases and personnel additions for police and security functions, leading to a Rating Outlook revision for all district debt to Stable from Positive on July 7, 2006. Fitch Ratings believes that district trustees will adopt the administration’s proposed balanced budget plan for fiscal 2007 as an initial step toward returning its general fund balance to compliance with its policy requiring reserves to equal two months of expenditures. The district’s high direct debt burden as a ratio of taxable assessed valuation (TAV), even after adjusting for state support, is a credit concern, although sustained voter support is notable.

■ Rating Considerations Strong growth returned to the district’s tax base in recent fiscal periods, most notably in fiscal 2005, when TAV increased by 18% due to the purchase of the city’s nonprofit hospital by a private company, making it a taxable entity. Preliminary fiscal 2007 estimates point to growth of over 8% due to equal parts new construction and reappraisal. Ongoing downtown development should spur additional TAV growth in the future. The district’s top 10 taxpayers account for a moderate 14% of total TAV, led by the privately acquired hospital at over 5%. Current property tax collection rates are below average and typical for the border region but adequate on a total collections basis.

The district’s financial position had shown dramatic improvement in recent years but narrowed beginning in fiscal 2005 due to a combination of one-time and recurring costs. As a result of planned capital outlays, the creation of a district police department, and large teacher pay raises ($2,000), fiscal 2005 posted a $6.4 million general fund operating deficit, decreasing the undesignated fund balance to $12.2 million, or 6.8% of spending. Program expansions and capital outlays continued in fiscal 2006, resulting in a projected drawdown of $13.6 million, although the undesignated portion of its reserves is projected to decline by less than $5 million, leading to available reserves of $7.5 million, or 4.4% of spending. Under the new school funding formula, the administration’s proposed fiscal 2007 budget is balanced with the aid of the optional four-cent levy allowed by the new state law for general purposes. The proposed budget conservatively assumes a slight decline in average daily attendance (ADA), as well as year-round full employment, with no savings due to turnover or vacancies. Of long-term concern to Fitch is the district’s ability to return to structural balance in the face of increasing payroll costs and reduced local control under the new school funding formula.

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Public Finance

Laredo Independent School District, Texas

2

The Texas Legislature recently passed property tax relief measures that were subsequently signed by the governor. The legislation provides for mandatory reductions in the local operations and maintenance (O&M) property tax rate of 11% for fiscal 2007 and a cumulative 33% for fiscal 2008, based on the fiscal 2006 O&M tax rate. To offset the loss of local revenue, the state will increase its share of funding to local school districts, including Laredo ISD, so that the measures are expected to be revenue neutral.

Due to the district’s very low property wealth per student, the state currently supports 80% of Laredo ISD’s debt service for its unlimited tax bonds, including this issue, and lease revenue bonds. Adjusting for this substantial state support, direct debt as a percentage of TAV is still high at 5.5% due to the districtwide capital plan. Direct debt on a per capita basis is moderate at just under $900. Overall debt to TAV is high at 8.1%, reflecting issuances by the city of Laredo (general obligation [GO] debt rated ‘A+’ by Fitch), Webb County (GO debt rated ‘A+’ by Fitch), and Laredo Community College District (GO debt rated ‘A+’ by Fitch). Overall debt per capita is more moderate at just over $1,300. Principal payout for all debt is slightly below average at 41% in 10 years. Given the recent award for state support on the series 2006 bonds, the debt service tax impact for the 2006 bonds is projected to be about $0.05 initially and decrease slightly thereafter upon receipt of existing debt allotment funds. In addition, because of declining cash reserves, as well as the large amount of grant funds awarded to the district, a tax anticipation note borrowing of approximately $12 million is planned for later this month.

Located on the Rio Grande, the border city of Laredo serves as the principal port of entry into Mexico and the largest inland port in the U.S. Over the past decade, Laredo has undergone substantial population growth. However, the district’s enrollment of approximately 23,000 has experienced only modest growth due to central Laredo’s nearly complete development. Laredo’s proximity to Mexico and an economic base focused on trade and transportation closely link its economic health to that of its southern neighbor. Trickle-down effects of fluctuations in the value of the peso and dependence on international policies can create some economic uncertainty for the area. Recent integration of the U.S. and Mexican economies through free trade agreements and Laredo’s essential transportation network has added stability.

Strengths • Sustained community support for the growing

capital plan. • Substantial state support for operations and

capital-related program. • Growing taxable values.

Risks • Weakened financial margins. • High debt levels.

For more information, see Fitch Research on “Laredo Independent School District, Texas,” dated July 9, 2006, available on Fitch’s web site at www.fitchratings.com.

Copyright © 2006 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries. One State Street Plaza, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. All of the information contained herein has been obtained from sources which Fitch believes are reliable, but Fitch does not verify the truth or accuracy of the information. The information in this report is provided “as is” without any representation or warranty of any kind. A Fitch rating is an opinion as to the creditworthiness of a security, not a recommendation to buy, sell or hold any security.

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