The Rating Outlook is Stable.
The LTGOs and COs are secured by an ad valorem tax pledge limited to
KEY RATING DRIVERS
STRONG FINANCIAL PROFILE: The city has maintained consistently positive operating margins, strong fund balances, and ample liquidity.
RELIANCE ON SALES TAX RECEIPTS: Strong reserves mitigate somewhat the general fund's moderate reliance on sales tax receipts from a limited, low-income economic base. After slipping due to recessionary pressure, sales tax revenues have climbed consistently for the past four fiscal years with continued growth projected.
MANAGEABLE DEBT AND CARRYING COSTS: Overall debt levels are moderate despite the city's low wealth levels. Carrying costs, including debt service and retiree benefits, are expected to remain manageable, given conservative future debt plans.
LIMITED BUT STABLE ECONOMY; LOW WEALTH: The local economy is limited, with employment anchored by the state prison system headquarters and a large state university. Employment metrics have shown stable growth, though area wealth indicators are low, skewed somewhat by the inclusion of a large prison inmate and student population in the census count.
The rating is sensitive to shifts in the city's strong financial management practices, including maintenance of high reserve levels as an offset to the city's volatile revenue base. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.
The city, located on
LIMITED ECONOMY ANCHORED BY STATE GOVERNMENT
A large state government presence, led by the
The local employment base has remained stable, with modest recessionary losses followed by recent growth. The city's low unemployment rate of 4.5% as of April, 2014, is in line with the state (4.7%) and below the nation (5.9%) and consistent with historical trends. The city's wealth metrics remain approximately 50% below the state and nation, with an individual poverty rate greater than twice the national average, though the local prison and student populations skew these figures.
The city's TAV remained firm during the economic downturn, posting growth for all but one of the last five fiscal years due mostly to new retail development, which has a significant impact on the city's relatively modest tax base. TAV declined modestly in fiscal 2014, though the city is projecting 3.6% TAV growth for fiscal 2015 due to increases in the value of existing property, as per the county. Fitch considers this projection realistic, given the city's stable recessionary tax base performance.
STRONG FINANCIAL PROFILE
The city has posted positive results in all but one of the last five fiscal years, yielding exceptionally high liquidity and strong reserves, well above the city's formal minimum fund balance policy of 25% of budgeted expenditures. Reserves in excess of this amount are made available for transfers to the capital projects fund. The city reported an unrestricted general fund balance of
The city relies somewhat on economically sensitive sales tax revenues (37% of general fund revenues in fiscal 2013), but this reliance is largely offset by the city's high fund balances and ample liquidity. After declining by approximately 7% in fiscal 2010, sales tax receipts have shown consistent growth in the last three fiscal years due to new retail stores and the improving economic environment.
For fiscal 2014, management conservatively budgeted
MANAGEABLE DEBT AND OTHER LONG-TERM LIABILITIES
Fitch views the city's overall debt ratios as moderate at
Pension benefits are provided through the Texas Municipal Retirement System (TMRS), an agent multiple-employer plan. The plan has an estimated funded ratio of 85% as of
The city historically paid other post-employment befits (OPEB) on a pay-as-you-go basis, but has contributed approximately
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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