Fitch Rates Mansfield, TX's Economic Development Corporation Sub. Revs 'AA-'; Outlook Stable

AUSTIN, Texas--()--Fitch Ratings assigns a 'AA-' rating to the following Mansfield, Texas (the city) bonds:

--$2.9 million Mansfield Economic Development Corporation (EDC) sales tax revenue refunding bonds, new series 2014;

--$5.645 million EDC sales tax revenue refunding bonds, taxable new series 2015.

The bonds are scheduled for a negotiated sale the week of Dec. 8. Proceeds will refund series 2004 and 2004-A of the EDC outstanding sales tax bonds for interest savings.

In addition, Fitch takes the following rating actions:

--$11 million EDC outstanding sales tax bonds upgraded to 'AA+' from 'AA-';

--$10.6 million Mansfield Park Facilities Development Corporation (PFDC) outstanding sales tax bonds affirmed at 'AA-'.

The Rating Outlook is Stable.

SECURITY

The new series 2014 EDC bonds are payable from a subordinate lien on and pledge of a separate 1/2 of 1% sales and use tax levied within the city for the benefit of the EDC. The outstanding EDC and PFDC bonds are special obligations of each corporation and are payable from and secured by a first lien on and pledge of separate 1/2 of 1% sales and use taxes levied within the city for the benefit of the corporations. Both the EDC and PFDC were formed by the city to promote and provide for economic development.

KEY RATING DRIVERS

HEALTHY DEBT SERVICE COVERAGE: Sales tax revenues have realized healthy growth and generated solid coverage levels subsequent to a recessionary lull.

UPGRADE OF SENIOR EDCs: Upgrade of the outstanding EDC bonds assumes successful completion and closing on the proposed refunding of the series 2004 and 2004-A bonds. It reflects the planned closure of this senior lien and the very strong 17x coverage that will apply to the remaining series 2012 bonds subsequent to refunding. Fitch anticipates coverage of the senior EDC bonds to remain strong given the closed lien and a favorable economic outlook.

MODEST CAPITAL NEEDS: Fitch anticipates modest capital spending for these two corporations based on the current long-term plan. Funding is primarily from the residual sales tax revenues.

ABOVE-AVERAGE DEMOGRAPHICS: Income and educational assessment levels trend well above average. Participation in the strong regional economy and the city's expanding job base contribute to a low unemployment rate.

GROWTH PROSPECTS: Mansfield's proximity to the Dallas-Fort Worth metroplex, coupled with its ongoing transportation infrastructure development, position the city for continuing residential and commercial/industrial expansion.

SALES TAX RATINGS CAPPED: The EDC and PFDC sales tax bond ratings are limited by the city's general credit quality to reflect the potential for a disruption in pledged revenue in the unlikely event of a bankruptcy filing by the city.

RATING SENSITIVITIES

SOUND COVERAGE: The ratings are sensitive to shifts in fundamental credit characteristics including maintenance of current healthy debt service coverage levels. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Mansfield is located within the ninth largest metropolitan area in the nation, with 1.1 million residents located within a 15-mile radius. The city's estimated population of 61,000 has more than doubled since the 2000 census. A significant amount of developable land remains within Mansfield's 38.6 square mile boundary.

NONPROFIT CORPORATIONS PROMOTE LOCAL ECONOMIC DEVELOPMENT

The PFDC is a 4B nonprofit corporation created in 1992 following the passage of a 1/2 of 1% sales tax; the EDC is a 4A corporation that was formed in 1997 with the passage of a separate 1/2 of 1% sales tax. The PFDC has focused on various parks and recreation projects since its creation, while the EDC has helped attract business to the city through location assistance and infrastructure improvements. In addition to sales tax revenues, both corporations receive gas royalty monies that are applied to their respective mission objectives.

HEALTHY SALES TAX RECEIPTS AND COVERAGE

The city's sales tax performed relatively well during the recession, flattening out during fiscal years 2009 and 2010 before resuming growth. Receipts rebounded strongly, realizing 6.1% compound annual growth during fiscal years 2011 through 2014.

Receipts for fiscal 2013 totaled $4.1 million for both corporations. EDC maximum annual debt service (MADS) of $1.2 million is covered a strong 3.33 times (x) by fiscal 2013 receipts; PFDC MADs of $1.25 million is covered 3.25x. Unaudited fiscal 2014 sales tax receipts of $4.5 million are up a strong 11.5% year-over-year, increasing MADs coverage to 3.71x and 3.63x for EDC and PFDC, respectively. Staff budgeted fiscal 2015 sales tax revenues flat to the fiscal 2014 actual results. Coverage responds well to stress tests, approximating 2.8x based on a severe 15% decline below fiscal 2013 audited revenues.

ADEQUATE LEGAL PROVISIONS

The additional bonds test is somewhat below average at 1.35x MADs. However, Fitch expects coverage to remain sound based on the corporations' ongoing operating costs, which limit debt capacity. The city has no borrowing plans for the EDC, which Fitch believes will contribute to maintenance of debt service coverage at healthy levels given current economic trends. Management expects a potential $2.5 million PFDC debt issue in fiscal 2016, which management reports will be layered into outstanding debt to preserve the current PFDC MADS coverage level. The standard reserve requirement for both series will be funded with surety bonds.

STRONG LOCAL ECONOMY WITH GROWTH PROSPECTS

The city participates in the Dallas Fort Worth (DFW) regional economy. Located in the southeastern portion of Tarrant County, the city is directly connected to nearby Dallas and Fort Worth, the DFW International Airport and surrounding communities by a robust and expanding transportation network. Given the regional infrastructure and proximity to the metroplex, the city is well positioned for additional growth.

Median household income is a high 174% of the national average; wealth as measured by per capita money income is also above average at 124% of the U.S. average. The city's levels of educational attainment trend well above average and contribute to a low unemployment rate of 4.6% as of August 2014.

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, National Association of Realtors.

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=931397

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Rebecca Meyer
Director
+1 512-215-3733
Fitch Ratings, Inc.
111 Congress Avenue, Suite 2010
Austin, Texas 78701
or
Secondary Analyst
Leslie Cook
Analyst
+1 212-908-1507
or
Committee Chairperson
Steve Murray
Senior Director
+1 512-215-3739
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Rebecca Meyer
Director
+1 512-215-3733
Fitch Ratings, Inc.
111 Congress Avenue, Suite 2010
Austin, Texas 78701
or
Secondary Analyst
Leslie Cook
Analyst
+1 212-908-1507
or
Committee Chairperson
Steve Murray
Senior Director
+1 512-215-3739
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com