The bonds will be sold via competition on
Fitch also affirms its 'AA+' rating on outstanding limited tax COs, series 2010 and 2011.
The Rating Outlook is Stable.
All bonds are secured by an ad valorem tax levied upon all taxable property within the city. The tax rate is limited to
The series 2014 COs are additionally secured by a limited pledge of the city's hotel occupancy tax.
The series 2010 COs are additionally secured by a limited, de minims pledge of net revenues of the city's water and sewer system.
The series 2011 COs are additionally secured by a limited, nominal pledge of net revenues of the city's airport system.
KEY RATING DRIVERS
WELL-MANAGED FINANCES, VERY STRONG RESERVES: Sound management practices have sustained the city's strong financial profile and proactive approach to funding operations, economic development and capital needs. Operating reserves and liquidity provide a good fiscal cushion against unforeseen budget and economic stress.
DIVERSE INTERNATIONAL ECONOMY: The city is a premier commercial and industrial hub in the
IMPROVING BUT BELOW-AVERAGE DEMOGRAPHICS: Per capita income has increased at a rate faster than the state and nation but overall wealth indices and educational attainment measures remain below average. These concerns are somewhat tempered by the region's low cost-of-living.
CONCENTRATION IN SALES TAX: Relatively high dependence upon economically sensitive sales tax revenues for operations is a risk, particularly when considering the large amount of retail activity generated by shoppers from
AFFORDABLE LONG-TERM LIABILITY BURDEN: Outstanding debt levels are moderate and carrying costs for debt service and retiree benefits are very low relative to the budget. Amortization is average and the city plans to continue utilizing its pay-as-you-go approach to capital improvements.
The rating is sensitive to shifts in the fundamental credit characteristics of the city, including its strong financial management practices and economic diversification and growth. The high rating and Stable Outlook reflect Fitch's expectation that such shifts are unlikely.
The city benefits from trade with
Strong retail and healthcare sectors in the city serve both the growing south
The city's employment picture is positive. Annual job growth has occurred in all but one year since 2004. The
City wealth levels are above average for the region but remain well below state and national norms. Tax base growth has been good but the per-capita market value (
Taxable value has returned to growth following a slowdown during the recession, during which taxable assessed valuation (TAV) marginally declined. TAV has increased by a 1.1% annual compounded average in the last five fiscal years (2009-2014). Prospects for continued growth are positive given the business investment occurring in the area and stability in real estate values.
EXCELLENT MANAGEMENT PRACTICES UNDERPIN CITY'S STRONG FINANCIAL PROFILE
The city maintains a good level of financial flexibility that is supported by its sizable reserves, low tax rate and sound policies adopted by the city council. The city has prudently maintained a high level of general fund reserves and continued to make transfers out for capital projects and some early debt retirement; these transfers have averaged 5.3% of total general fund spending since fiscal 2008.
The general fund concluded fiscal 2012 with a modest operating surplus after transfers of
Fiscal 2013 preliminary unaudited results indicate a small
Management adopted a surplus fiscal 2014 budget that increases spending by 5.5%, supported by reasonable assumptions for sales tax and property tax revenue gains. Appropriations include 0.5% pay raises for fire department personnel, as dictated by a collective bargaining agreement in place, 3% pay raises for all other staff, and additional positions. There was no change in tax rates. The city expects to maintain its sizable fiscal cushion at year-end.
HIGH SALES TAX DEPENDENCY MITIGATED BY SUBSTANTIAL RESERVES
Operating revenues are led by sales tax collections which represented a substantial 43% of general fund revenues in fiscal 2012. Sales tax performance has been notably strong due to annual growth in retail sales, but this revenue stream was not immune to recessionary forces and declined by 7% and 2% in fiscal years 2009 and 2010. Receipts flattened in fiscal 2011 before increasing by 5% in both fiscal 2012 and fiscal 2013 (unaudited); cash-basis receipts through December show year-to-date fiscal 2014 revenues tracking very closely with last year's trend but running slightly below budget, which may reduce the budgeted general fund surplus.
Fitch views the high degree of reliance on economically sensitive sales taxes to be a risk, particularly when considering that 35% of retail purchases are sources from
AFFORDABLE DEBT BURDEN
Overall debt levels are moderate at
Voters approved this GO authority in
WELL-FUNDED LEGACY BENEFITS
All city employees with the exception of fire personnel participate in a joint contributory, hybrid defined benefit pension plan through the state-wide Texas Municipal Retirement System (TMRS). The city pension's already high funded position was further increased with TMRS' actuarial methodology changes in 2011. The city's TMRS pension liability was 100% funded as of
Other post-employment benefit (OPEB) liabilities for retiree healthcare are modest; the unfunded liability equaled 0.1% of fiscal 2012 full market value. The city has set aside funds towards the unfunded liability, which reside in a retiree healthcare fund which is not an irrevocable trust. Total carrying costs for debt service, pension ARC, and OPEB pay-go are projected to remain quite affordable with this debt issuance at about 10% of spending.
Additional information is available at www.fitchratings.com.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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