AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'AAA' rating on the following Colleyville, Texas (the city), limited tax general obligation (GO) debt:
--$4.3 million outstanding GO bonds, series 2007;
--$3.7 million outstanding combination tax and tax increment refunding bonds (TIF bonds), series 2011;
--$910,000 outstanding GO refunding bonds, series 2011.
The Rating Outlook is Stable.
The GOs and TIF bonds are secured and payable from ad valorem taxes levied against all taxable property within the city, subject to a $2.50 per $100 assessed valuation limitation imposed by the state constitution and the city charter. The TIF bonds are additionally secured by a lien on and pledge of certain tax increment revenues of the city.
KEY RATING DRIVERS
HEALTHY FINANCIAL POSITION: The city's financial profile is very healthy as evidenced by strong reserve levels, ample liquidity, conservative budgeting practices, and strong financial policies.
SOLID TAX BASE: The city's affluent tax base is primarily residential in nature. Taxable assessed values (TAV) held relatively steady during the downturn with only a modest decline in fiscal 2011. Positive indicators of future commercial growth include the expansion of State Highway 26, which traverses the city, and the current redevelopment of a major shopping center.
MANAGEABLE DEBT BURDEN: The city's capital plans are manageable and existing debt amortizes rapidly. Overall debt levels are average-to-above average due to overlapping school district debt.
BROAD AND DIVERSE ECONOMY: The city is part of the broad and diverse Dallas-Fort Worth-Arlington metropolitan statistical area (MSA) economy and employment base. Local wealth levels as measured by median household income are 300% of the national average.
SHIFT IN FUNDAMENTALS: The rating is sensitive to material changes in fundamental credit characteristics, including the city's strong financial management practices. The city's history of reserve adequacy and sound financial management practices indicates expected rating stability.
Colleyville is a small, upper income community located in the Dallas-Fort Worth MSA, approximately 11 miles northeast of Fort Worth. The city has an estimated population of nearly 24,000 and anticipates reaching a full build-out population of 26,000 in the next 10 to 15 years. The city limits cover approximately 13 square miles and its tax base of nearly $4 billion is primarily residential. Retail and commercial development help to diversify the city's revenue stream and tax base. With additional shopping and entertainment venues as well as office space, retail activity has generated healthy sales tax revenue growth. The city continues to focus on promoting economic development in the community to further diversify its tax base.
SOUND FINANCIAL POSITION
The city's financial position remains healthy despite the recent challenges of the economic recession and the city's lifecycle shift from rapid growth to nearing full build-out. Sales tax revenue growth has offset declines in building permits and licenses, while property tax receipts, which account for approximately 60% of general fund sources, continue to perform well, benefiting from TAV growth. The city's tax rate has held steady at $0.356 per $100 TAV, which is comparable to surrounding communities.
The unreserved general fund balance has historically been maintained well above the city's 25% of spending policy. At the close of fiscal 2013, the unrestricted general fund balance was $11.8 million, representing a strong 55% of spending and transfers out. The budget for fiscal 2014 includes a $1 million drawdown of general fund balance for a street rehabilitation project, and management expects that the city will outperform its budget. The city's five-year forecast maintains fund balance in excess of 120 days of spending.
MODERATE OVERALL DEBT BURDEN; LIMITED CAPITAL NEEDS
The city's overall debt per capita is above average with the inclusion of overlapping school district debt, and debt is moderate when compared with full market value. However, carrying costs (including pension and OPEB payments) are affordable at less than 14% of governmental spending and debt retirement is rapid at 75% in 10 years. Fitch considers future capital needs manageable, and the city does not anticipate any additional tax-supported borrowings in the near term.
Pension benefits are provided through the Texas Municipal Retirement System (TMRS), a statewide agent multiple-employer plan. The city's funding position is a robust 106% as of December 2013. Other post-employment benefits offered to retirees are limited to group life insurance of up to $7,500 (one-time lump sum). This benefit is also offered through TMRS and the city has historically funded 100% of its modest annual required contribution.
Despite being nearly built-out with a marked contraction in new construction in recent years, the city's tax base has held up well. TAV grew modestly in each of the last three years, including a 2.6% increase for fiscal 2014, reflecting reappraisal gains on existing property. Management expects continued growth with the completion of a large shopping center redevelopment in summer 2014, which will be anchored by a Whole Foods store. Wealth levels as measured by median household income are 3x that of the national average.
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, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com, National Association of Realtors, and the Municipal Advisory Council of Texas.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria