New York, November 06, 2012 --

Moody's Ratings

Issue: Combined Fee Revenue Building Bonds, Series 2012; Rating: Aa3; Sale Amount: $70,820,000; Expected Sale Date: 11-14-2012; Rating Description: Revenue: Public University Broad Pledge

Issue: Combined Fee Revenue Building Bonds, Taxable Series 2012A; Rating: Aa3; Sale Amount: $5,825,000; Expected Sale Date: 11-14-2012; Rating Description: Revenue: Public University Broad Pledge

Opinion

Moody's Investors Service has assigned an Aa3 rating to Austin Community College District's (ACCD) $70.8 million fixed rate Combined Fee Revenue Building Bonds, Series 2012 and $5.8 million of Taxable Series 2012A. At this time, we are also affirming the Aa3 rating on the college's outstanding revenue bonds. The rating outlook has been revised to negative from stable.

SUMMARY RATING RATIONALE

The Aa3 rating reflects the college's sizeable enrollment base and location in a demographically vibrant area, large and diverse revenue base, and conservative debt structure. These credit strengths are offset by growing capital needs of the expanding college resulting in rapid increase in debt without similar growth in revenues, declines in operating performance, limited financial resources relative to debt and operations, and two years of enrollment declines.

The negative outlook reflects the expectation that the college will be challenged to grow financial resources and operating revenues commensurate with the current increase in revenue debt, and sustain further enrollment declines or stagnation given Austin's relatively healthy economy and the lack of specific plans to significantly address the countercyclical nature of enrollment relative to unemployment rates. In addition, the college is expected to continue to issue up to $500 million of additional debt for capital projects planned over the next 10 years, although this debt is expected to be supported by local tax revenues. The negative outlook also incorporates the warning status of the college's accreditation, which will be ruled on by the regional accrediting agency by June 2013, and addresses managerial challenges associated with oversight of this rapidly growing district.

CHALLENGES

*Very limited financial resource base with FY 2011 total financial resources of $47.7 million. Expendable financial resources of $43.7 million cushion pro-forma debt (includes revenue bonds, general obligations bonds and lease revenue bonds) by 0.09 times and operations by 0.17 times.

*Accreditation placed on warning by regional accreditor, Southern Association of Colleges and Schools Commission on Colleges (commonly referred to as SACS) in December 2011, and continued by SACS in June 2012; ACCD has responded with monitoring report concurrent with 10-year accreditation review.

*Softening student demand reflected in second year of declining enrollment, as the economy improves and more students return to the labor force. Some competition for students exists from regional four-year public and private institutions although the college is the only institution offering occupational training, comprehensive evening programs and open door admissions.

*Limited financial flexibility with current tax rates at the voter approved tax caps. In FY 2011, the college levies $.90 per $1,000 assessed valuation maintenance and operations ad valorem taxes.

*Additional capital needs, with approximately $500 million of identified capital projects over the next ten years to be funded by tax supported bonds.

*Narrow debt service coverage with a three year average (FY 2009-2011) of 1.1 times.

STRENGTHS

*Solid market position as provider of two-year education in Austin, Texas (rated Aaa). The district is attractively priced for in-district and out-of-district students, particularly in comparison to four-year institutions in the region. The college maintains a strong academic focus with approximately 40% of students transferring to four-year institutions.

*Diversified $251.7 million operating revenue base in FY 2011, that helps insulate the college from declines in state appropriations and cyclicality of community college enrollment with tuition, auxiliaries and student fees comprising 27% of revenue, state appropriations comprising 24% and ad valorem taxes of 40% of revenue.

*Debt outstanding is all fixed rate.

*Significant headroom to increase tax rates expressly for debt service and ability to annex additional school districts.

OUTLOOK

The negative outlook reflects the expectation that the college will be challenged to grow financial resources and operating revenues commensurate with the current increase in revenue debt, and sustain further enrollment declines or stagnation given Austin's relatively healthy economy and the lack of specific plans to significantly address the countercyclical nature of enrollment relative to unemployment rates. In addition, the college is expected to continue to issue up to $500 million of additional debt for capital projects planned over the next 10 years, although this debt is expected to be supported by local tax revenues. The negative outlook also incorporates the warning status of the college's accreditation, which will be ruled on by the regional accrediting agency by June 2013, and addresses managerial challenges associated with oversight of this rapidly growing district.

WHAT COULD MAKE THE RATING GO UP

Not likely given the negative outlook. Substantial growth of financial resources base; adequate enrollment growth to support new debt and sustain positive, or improve, operations

WHAT COULD MAKE THE RATING GO DOWN

Continuation of accreditation warning or negative sanction past June 2013 SACS meeting; further deterioration of operating performance as calculated by Moody's; weakening student market position; additional debt issuance without commensurate financial resource growth; decline in financial resources; lack of management response to adjust expenses should revenues fall short of budget

METHODOLOGY

The principal methodology used in this rating was Moody's Approach for Evaluating Community Colleges published in December 1999. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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Caitlin Bertha Associate Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Jenny L. Maloney Vice President - Senior Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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