The Rating Outlook is Stable.
The bonds and COs are secured by an ad valorem tax pledge levied against all taxable property within the city, limited to
The COs are additionally secured by a limited, nominal pledge of the net revenues of the city's water and wastewater system, not to exceed
KEY RATING DRIVERS
ADEQUATE FINANCIAL PROFILE: The city's financial profile is marked by generally stable operations and general fund levels which are satisfactory, although somewhat limited on a nominal basis.
SMALL, GROWING ECONOMY: The city's advantageous location south of
HIGH DEBT BURDEN: Overall debt levels are high, reflective of substantial school district debt. Principal amortization is average and near-term debt plans are manageable.
ADDITIONAL DEBT: A material increase in the city's already high debt burden could apply negative pressure to the rating.
LIMITED ECONOMY WITH GOOD PROSPECTS FOR GROWTH
The city's population, currently estimated at just over 11,000, has more than doubled since 2000. In tandem with population gains, tax base growth had been significant, increasing nearly 60% between fiscals 2006 and 2009. TAV growth slowed beginning in fiscal 2010, reflecting the weakened housing market, but has recently regained momentum, albeit at a moderated pace. Fiscal 2014 marked a strong 7% uptick in TAV and certified values for fiscal 2015 show another year of growth at 3%. Fitch believes prospects for additional growth are favorable given the city's proximity to
The city's local employment base is small and includes numerous light manufacturers, aerospace, retail, healthcare, and governmental entities. The majority of residents commute to jobs in the
Resident wealth levels are somewhat mixed but in line with county and state levels. The county reported a low 5.0% unemployment rate in
STABLE FINANCIAL PERFORMANCE
The city ended the fiscal year with positive operating results in four of the last five years. The city relies primarily on property and sales taxes for general fund operating support, making up 40% and 17% of general fund revenues in fiscal year 2013, respectively. The city's tax rate has remained at
The city closed fiscal 2013 with a net operating surplus of
Management expects to end fiscal 2014 with a small surplus of
The city anticipates adopting a balanced budget for fiscal 2015 that includes a 7.5% increase in sales tax revenues over last year's budget, compared to the 10% increase budgeted in fiscal 2014. Given the 13% growth in sales tax in fiscal 2014 and the current retail development underway, management expects to exceed budgeted figures for a second consecutive year. Fitch views the city's ability to conservatively budget inherently volatile sales tax revenues as an increasingly important credit consideration as this revenue stream becomes a larger proportion of general fund sources.
HIGH OVERALL DEBT BURDEN
Overall debt ratios are very high at
The city historically funded most capital spending by paygo but in recent years has chosen to issue debt. Modest issuances of tax notes in 2014 were for various capital improvements and equipment purchases. Future tax-supported debt will likely be contingent on the city's growth trajectory but Fitch expects it will remain affordable.
WELL-FUNDED RETIREMENT LIABILITIES
The city's pension and other post-employment benefits (OPEB) are provided through the Texas Municipal Retirement System (TMRS), a statewide agent multiple-employer plan. Recent structural and actuarial changes to TMRS approved at the state level significantly boosted the city's funded position to a strong 88.9% at
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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