The Rating Outlook is Stable.
The bonds are secured by an ad valorem tax pledge levied against all taxable property with the city of Heath, 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
SMALL, AFFLUENT BEDROOM COMMUNITY: Heath's lakeside location and close proximity to the extensive
STABLE FINANCIAL PERFORMANCE: The city has maintained solid reserve levels and retains ample taxing margin due to a below average tax rate for the state.
SOLID REVENUE BASE: Operations are principally funded from property tax revenue. Collection rates are strong and the tax base shows signs of strong growth after some stagnation post-recession.
HIGH AND INCREASING DEBT LEVELS: Overall debt levels are now exceptionally high driven by sizable overlapping debt and recent tax-supported issuances by the city. Debt levels are likely to remain high given average amortization of direct debt.
SOLID CREDIT PROFILE: Sound reserves, financial flexibility, and superior wealth levels are key offsets to the city's high overall debt. A change in these mitigating factors would place downward pressure on the rating.
AFFLUENT LAKEFRONT COMMUNITY NEAR
This small and affluent bedroom community is situated on the banks of
The city's proximity to the broad
Local development slowed with the economic downturn, arresting the double-digit rate of growth in the city's TAV seen pre-2009. The city's assessed value contracted marginally from fiscals 2011-2013, cumulatively 1.5%. TAV began recovering in 2014 marked by 4.3% growth and 2015 certified values showed a second year of strong growth at 6.5%.
STABLE FINANCIAL PERFORMANCE
The city historically achieves break-even operating results after transfers and ended fiscal 2013 with a moderate surplus of
Operations are reliant on property tax revenues (approximately 60% of budget) and exposure to economically sensitive sales tax revenue is minimal. The 2014 tax rate of
The 2015 proposed operating budget includes a 12% increase in revenues driven by property taxes, and a marginal fund balance draw of
HIGH DEBT LEVELS
Debt levels are very high at 13,000 per capita and 8.9% of market value, partly driven by overlapping school district debt. Direct debt has increased notably over the last two years, and the rate of principal amortization has declined to average, at 50%, from prior rapid rates.
The city's future capital needs are largely associated with residential development and related infrastructure, namely for the water-sewer system and roads. The city does not have any immediate-term debt plans, yet given the residential and retail development on the horizon Fitch believes there will be demand for additional infrastructure.
WELL-FUNDED PENSION LIABILITY
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 86.9% at
Carrying costs for the city (debt service, pension and OPEB costs) are estimated at a moderate 23.8% of governmental spending in fiscal 2013 yet are expected to almost double in the near-term given the additional debt service from the recent issuances. Fitch views carrying costs at this level as extremely high, yet believes the city has sufficient financial flexibility to accommodate the added debt.
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
Most Popular Stories
- PBS Series Examines America's Demographic Shift
- Americans Bet Big on Gambling Industry
- Exxon Gives Nod to Fracking Risks
- Petri Likely Broke House Ethics Rules
- California's Ban on Plastic Bags: What Now?
- Morgan: 'Can't Believe' Wal-Mart Blaming Him
- Wealth Gap Widens as Rich Spend More on Kids' Education
- Texas Sees Gains in Hispanic College Enrollment
- Lack of Sea Ice Brings 35,000 Walruses Ashore
- Can You Be Fired for Using Medical Marijuana?