The GOs are scheduled to sell via negotiation
In addition, Fitch affirms the following rating:
The Rating Outlook is Stable.
The GOs and COs are secured by a limited ad valorem tax pledge of the city, not to exceed
KEY RATING DRIVERS
STRONG FINANCIAL PROFILE: The city maintains a stable financial position and solid reserve levels, enabled by management's conservative, proactive financial practices and prudent fiscal policies. Recent financial performance has benefitted from some modest improvement in revenue trends, largely reflective of a strengthening local economy.
STABLE TAV: The city's tax base is solid and diverse. TAV has remained stable and grew very modestly in fiscal 2014 after a period of modest recessionary TAV declines. Modest TAV growth is anticipated over the near-term, which Fitch believes is reasonable given various development projects underway.
DEBT AND OTHER LONG-TERM LIABILITIES MANAGEABLE: Overall debt levels are above average in contrast to the city's generally favorable direct debt profile. Amortization of tax-supported principal is rapid. Other long-term liabilities of the city are moderate.
MAINTENANCE OF FINANCIAL POSITION: Material deterioration of the city's financial position could signal a fundamental shift in its credit profile, leading to negative rating action. The Stable Outlook reflects Fitch's expectations that such a shift is unlikely as evidenced by the city's historical financial performance.
MATURE CITY; STABLE MANUFACTURING CENTER
The city benefits from its favorable location within the Dallas-Fort Worth MSA, surrounded by major transportation corridors. Population growth has been minimal since 2000 as the city is near full build-out with a stable population base, currently estimated at nearly 232,000 residents. Income and wealth levels as measured by median household income approximate the U.S. and slightly exceed the state's, although educational attainment metrics are below national averages.
The city's industrial market is the second largest in the MSA, with a diverse list of manufacturing and distribution concerns that are the primary economic engines for the city. Year-over-year unemployment edged down slightly to 5.9% in
The city's tax base is primarily residential in nature despite its industrial/commercial base. Top 10 taxpayer concentration is minimal at 5.7% in fiscal 2014. Market value per capita is moderate at
Recessionary pressures on property valuations saw an end to TAV gains beginning in fiscal 2010. Over fiscals 2010 - 2012, TAV reached
Stronger economic metrics such as higher year-over-year levels of building permits and various development projects underway point to the likelihood of some additional TAV growth over the near-term. New retail and big-box redevelopment projects as well as higher-end, apartments/condominiums in proximity to City Center and an existing
Management expects development along tollway and interstate growth corridors to further strengthen taxable values over the intermediate term. Commercial development along the George Bush Tollway to the north has enhanced the city's retail base. This includes the
SOLID FINANCIAL PROFILE
Operations are supported by a fairly diverse revenue base, led by property taxes that provided nearly 40% of total general operating revenue in fiscal 2012, followed by sales taxes at 20%. Management's timely budget cuts and proactive oversight enabled the city to maintain a stable financial position despite the pressures associated with its relatively mature economy and slow recovery from the recession. Notably, the city maintained this solid position without increasing the total tax rate over two fiscal years of modest TAV declines. The city posted modest net operating deficits after transfers in the general fund in two of the last five fiscal years, but reserves as a percentage of spending have remained stable over this period and well above the city's policy to maintain a 30-day unreserved fund balance.
Reserves strengthened modestly in fiscal 2012 with a
The approved fiscal 2014
As part of its multi-year planning efforts, the city prepares a five-year financial forecast (fiscals 2013-2018). The current look-ahead anticipates modest annual operating gaps (no more than 2% of the year's budgeted spending) in out years with draws on reserves to below the 30-day policy level under conservative revenue, expenditure, and economic assumptions. Nonetheless, Fitch recognizes the modest nature of the imbalance and 'worst case' projections while taking comfort from management's historically strong fiscal practices and budgetary oversight that have enabled the maintenance of reserves well above policy.
DEBT AND OTHER LONG-TERM LIABILITIES MANAGEABLE
The overall debt burden is above average at 5.7% of market value and largely due to overlapping school district debt, but more moderate on a per capita basis at about
The city maintains a measured pace of tax-supported and revenue debt issuance annually in support of its capital improvement plan (CIP). A comprehensive, five-year CIP is adopted annually, much of which is driven by various utility system capital projects and is expected to be funded by self-supporting debt. The most recent CIP (fiscals 2013-2018) reflects some growth in the city's tax-supported capital plans, which are up by about
Streets are a key capital priority for the city. Voters strongly approved
The city's pension plan is through the Texas Municipal Retirement System (TMRS), a statewide agent multiple-employer plan. Contribution rates are determined each calendar year. For fiscals 2011-2013, the city paid 100% of the annual required contribution (ARC), which totaled a reduced
The city provides other post-employment benefits (OPEB) through a self-funded single-employer plan. Funding is done annually on a pay-go basis, which has covered between 50% - 65% of the actuarially determined annual OPEB cost in the last three fiscal years (2011 - 2013). However, Fitch's concerns are largely mitigated due to the relatively small OPEB liability; the unfunded actuarial accrued liability remains modest at
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
Additional information is available at 'www.fitchratings.com'.
--'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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