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Fitch Rates Del Mar College District, Texas' Tax Rfdg Bonds 'AA+'; Outlook Stable

January 28, 2014

Fitch Ratings assigns an 'AA+' rating to the following Del Mar College District , Texas (the district) limited tax debt: -- $9 million limited tax refunding bonds, series 2014. In a release on January 14 , Fitch noted that the securities are scheduled to sell January 22 via negotiation. Proceeds will be used to refund various outstanding maturities for economic savings and to pay related costs of issuance. In addition, Fitch affirms the following rating: -- $75.4 million in outstanding limited tax bonds (pre-refunding) at 'AA+'. The Rating Outlook is Stable. Security: The bonds are secured by an ad valorem tax levied on all taxable property within the district, limited to $0.50 per $100 of taxable assessed valuation (TAV). Key Rating Drivers Strong Financial Position: The district maintains a sound financial profile despite counter-cyclic enrollment loss as a result of a strong local economy. The revenue base is relatively diverse and the district maintains positive operating margins and solid reserve levels. Healthy revenue and more moderate expenditure flexibility remain. Economic Sectors Expanding: Much of the commercial/industrial development underway or planned revolves around the petrochemical industry, including refineries, associated oil/gas support industries, and shipping/port activity that have traditionally anchored the Corpus Christi (the city) economy. Year-over-year unemployment is down and slightly below the state average despite solid labor force growth. The city serves as a regional employment center. Stable Tax Base with Concentratioin: Tax base concentration is moderately high with notable petrochemical, energy sector concentration in the top taxpayer mix; this lack of diversity constitutes a measure of risk to the district. The district's tax base has historically experienced steady growth. TAV gains have accelerated as the tax base quickly regained its footing after a one- year recessionary decline. Debt and Other Long-Term Liabilities Moderate: The overall debt burden is moderate. Principal amortization of tax-supported debt is favorably rapid. Capital needs are manageable, assisted by moderating enrollment trends and solid reserves that support some pay-go capital spending. Carrying costs are moderate. Rating Sensitivities Shift in Credit Fundamentals: The rating is sensitive to shifts in fundamental credit characteristics, including the district's strong financial position and conservative fiscal practices that support this high-level rating. The Stable Outlook reflects Fitch's expectations that such shifts are unlikely. Credit Profile Headquartered in Corpus Christi (GO bonds rated 'AA', Stable Outlook by Fitch), Del Mar College District is a two-year comprehensive community college serving a population of roughly 350,000 primarily in Nueces County and the surrounding area. Income and wealth levels fall below state and national averages by about 10 percent-15 percent as measured by median household income. Population gains since 2000 have been relatively modest, averaging about 1 percent annually or roughly half of the state's rate of growth. Surging Economic Activity Situated on the Gulf Coast , Corpus Christi is the eighth largest city in Texas and serves as the regional economic center for a 12- county area. The area's economic base consists primarily of petrochemical and shipping, tourism, agriculture, and the military. The deep-sea Port of Corpus Christi (the port) ranks as the fifth largest in the nation and 44th in the world based on tonnage. Overall economic activity in the metropolitan statistical area (MSA) is up given its proximity to the large and recently productive Eagle Ford Shale oil/gas formation in neighboring counties. Management reports various commercial/industrial projects underway or planned that will capitalize on the area's traditional economic strength in the energy sector and associated industries. They include a number of liquified natural gas (LNG) plants. Also of note is the $2 billion Tianjin Pipe Corp. (TPCO America) steel pipe mill project located adjacent to the port that is projected to be one of the largest Chinese investments in the U.S., adding 600 permanent jobs to the area. In addition, district management reports another large industrial development project by the M&G Corp. that includes construction of two plastics (PET resin) plants in the port and represents a roughly $900 million investment and the addition of 250 permanent jobs. Relatively low area unemployment levels reflect the expanding economy. Unemployment in the MSA edged down to 5.7 percent in October 2013 from 5.8 percent as of October 2012 as healthy year- over-year gains in employment offset the gain in labor force. This rate was below the state and U.S. averages of 6.0 percent and 7.0 percent, respectively. TAV Gain in Concentrated Tax Base The district's tax base has historically experienced solid growth and TAV quickly regained its footing after registering a modest 4.5 percent decline in fiscal 2011. A 2 percent TAV gain was realized in fiscal 2012 and another 2.5 percent gain occurred in fiscal 2013, which increased TAV to about $18 billion . Top taxpayers consist of a generally stable list of refineries, energy and petrochemical businesses and provide moderately high taxpayer concentration of approximately 16 percent (fiscal 2014), led by the Flint Hills refinery at 4.6 percent. TAV growth in fiscal 2014 was strong at roughly 10 percent, evidence of the increased levels of economic activity in the area. Nonetheless, Fitch recognizes that TAV gains will be tempered over the intermediate term by management's decision to participate in standard, 10-year tax abatement agreements with some of the larger industrial expansions in its taxing jurisdiction, including the planned M&G plastics plants. Additional information is available at 'fitchratings.com '. Applicable Criteria and Related Research : --'Tax-Supported Rating Criteria' ( August 14 , 2012); --'U.S. Local Government Tax-Supported Rating Criteria' ( August 14 , 2012). Applicable Criteria and Related Research : Tax-Supported Rating Criteria http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=686015 U.S. Local Government Tax-Supported Rating Criteria http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=685314 Additional Disclosure Solicitation Status http://fitchratings.com/gws/en/disclosure/ solicitation?pr_id=814451 ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


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