Fitch Rates Flower Mound, TX COs 'AAA'; Outlook Stable

AUSTIN, Texas--(BUSINESS WIRE)-- Fitch Ratings assigns a rating of 'AAA' to the following obligations of the town of Flower Mound, Texas (the town):

--$11.86 million certificates of obligation (COs), series 2015A.

The COs are expected to price via negotiation the week of July 20, pending market conditions. Proceeds from the COs will be used for streets, signals, and water system improvements.

Fitch currently rates the town's $122.3 million in outstanding limited tax obligations, consisting of GOs and certificates of obligation (COs), 'AAA'.

The Rating Outlook is Stable.

SECURITY

The GOs and COs are payable from an ad valorem tax levied on all taxable property within the town, limited to $2.50 per $100 taxable assessed valuation (TAV). The COs are additionally secured by a nominal pledge of subordinate net revenues (limited in amount typically to $1,000) from the town's water and wastewater system.

KEY RATING DRIVERS

CONSISTENT FINANCIAL PERFORMANCE: The town's consistent financial performance has contributed to healthy reserves in excess of its policy target. Dedicated funding sources, including citizen-approved sales taxes provide additional funding for general government needs and contribute to a relatively low ad valorem tax rate.

STRATEGIC LOCATION; STRONG DEMOGRAPHICS: The town lies on Grapevine Lake and is strategically located within close proximity to the Dallas-Fort Worth (DFW) airport. Low unemployment reflects access to the DFW job market and an expanding local employment base. Income, wealth, and education attainment levels are high.

SOUND TAX BASE GROWTH: The largely residential tax base performed well during the recession. Accelerated growth over the recent past reflects a pick-up in new commercial/industrial, as well as residential development and a rise in home prices. Fitch anticipates these trends to continue based on current and planned activity levels.

MODERATE DEBT PROFILE: A slightly elevated overall debt burden results from overlapping debt of local school districts. The town's carrying costs, annual debt service, pension and other post-employment contributions (OPEB), are moderate and incorporate a rapid amortization rate. New debt plans are modest. Pensions are well-funded.

RATING SENSITIVITIES

SOLID CREDIT PROFILE: The rating is sensitive to maintenance of a strong financial profile and manageable debt burden consistent with the town's 'AAA' rating.

CREDIT PROFILE

The town of Flower Mound, population of about 68,600, is located 28 miles northwest of downtown Dallas and within three miles of the DFW airport.

STABLE LOCAL ECONOMY WITH GROWTH PROSPECTS

Flower Mound has transitioned from a bedroom community to an increasingly diverse economy, benefitting from its proximity to the DFW metroplex and airport. The tax base is composed primarily of high-end residential (78%) and commercial and industrial properties (22%) and is without concentration. Median household income represents 228%, and per capita money income 162% of the U.S. averages, respectively. Levels of educational attainment are also significantly higher than the U.S. average, positioning the town for ongoing growth and prosperity.

Taxable assessed value (TAV) has grown by a sound 3% on average over the past decade, and at a greater rate over the past three years. TAV increased 4.6% in fiscal 2014, 8.5% in fiscal 2015 and 13.9% in fiscal 2016 according to preliminary values, fueled by accelerated development and rising property values. Fitch anticipates sound near-term growth based on development underway. Fiscal 2015 market value per capita is a high $130,000.

The town's unemployment rate as of March 2015 is a low 3.3%, reflecting access to the broad regional job market and an increasing local employment base. Large employers include governmental, school district, medical sector, manufacturing and retail concerns.

CONSISTENT PERFORMANCE BUILDS HEALTHY RESERVES

The town's diverse general fund revenue stream consists of property taxes (48% of total revenues), sales taxes (18%), franchise and other taxes (14%), charges for services, and fees. Other dedicated funding sources such as a 1/4 of 1% economic development additional sales tax and a 1/4 of 1% additional sales tax for street maintenance mitigate operating and capital pressure on the general and debt service funds; the low $.44 per $100 of TAV ad valorem tax rate is well below the $2.50 limit.

Long-term planning and cost monitoring help the town to maintain a strong financial position, evidenced by healthy reserves in excess of policy targets. The town's fund balance policy targets a minimum 15% of general fund budgeted operating expenditures, although favorable performance has contributed to unrestricted reserves in the range of 23% to 32% over the past several years.

A healthy fiscal 2014 unrestricted general fund balance of $15.9 million (34.2% of spending) reflects a consistent trend of strong revenue growth. Officials project a year-end fiscal 2015 unrestricted general fund balance of $16 million, about 32% of spending. The city's fiscal 2016 budget and long-term plan include conservative assumptions and solid reserves in excess of policy targets.

MODERATE DEBT PROFILE AND WELL-FUNDED PENSIONS

Overall debt is somewhat elevated at 5.7% of market value. At 13.5% of governmental spending, the debt service burden on the budget is also modestly elevated due to a rapid rate amortization of 76% within 10 years.

The town's fiscal 2015 general government five-year capital plan is manageable at about $123 million. Capital plan funding sources include dedicated sales taxes, impact fees, developer agreements, tax increment reinvestment zone (TIRZ) monies, and grants. The plan includes only $23 million of new debt issuance, compared to $55 million in debt retirements during the same period.

The town's pension plan, as well as disability and death benefits, is administered through the Texas Municipal Retirement System. The town's funded position is strong at 90.2% as of Dec. 31, 2013, reflecting the town's assumed 7% rate of return. Carrying costs including debt service, pension and OPEB contributions represent a moderate 17.5% of governmental fund spending.

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

Tax-Supported Rating Criteria (pub. 14 Aug 2012)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria (pub. 14 Aug 2012)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosures

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988185

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150720006028/en/

Fitch Ratings
Primary Analyst:
Rebecca Meyer, CFA, CPA, +1-512-215-3733
Director
Fitch Ratings, Inc.
111 Congress Ste. 2010
Austin, TX 78701
or
Secondary Analyst:
Shane Sellstrom, +1-512-215-3727
Analyst
or
Committee Chairperson:
Arlene Bohner, +1-212-908-0554
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Dimensional Fund Advisors Ltd. : Form 8.3 - DCC Energy PLC - Ordinary Shares
• Spartan Metals Commences Maiden Drilling Program at Its Eagle Tungsten-Silver-Rubidium Project, Nevada
• Havas Reports the Progress of Transactions Under Its Current Share Buyback Program