Fitch Rates Overland Park, KS's GOs 'AAA'; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'AAA' rating to the following Overland Park, KS (the city) unlimited tax general obligation (ULTGO) bonds:

--$15.935 million internal improvement bonds series 2015A;

--$2.33 million internal improvement refunding bonds series 2015B;

--$18.495 million internal improvement refunding bonds series 2015C.

The bonds are scheduled for a competitive sale the week of Sept. 21. Proceeds will be used to finance various capital projects and refund outstanding bonds.

In addition, Fitch has affirmed the 'AAA' rating on the city's outstanding ULTGO bonds.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the city backed by the city's full faith and credit and its ad valorem tax, without limitation as to rate or amount.

KEY RATING DRIVERS

STRONG ECONOMIC BASE: Overland Park enjoys a deep and diverse local economic base, reflected in its low unemployment rate and strong assessed value (AV) growth.

ABOVE AVERAGE SOCIOECONOMIC PROFILE: Wealth levels are above average and education levels are high.

SOLID FINANCIAL OPERATIONS: Results for 2014 show a third straight year of positive operations, augmenting already sizable reserves, with another surplus expected for 2015.

MODERATE LONG-TERM LIABILITIES: Overall debt levels are moderate and direct debt is rapidly amortized. Pension and other post-employment benefit (OPEB) liabilities are manageable.

RATING SENSITIVITIES

FUNDAMENTAL CHANGES: The rating is sensitive to the shifts in the city's fundamental credit characteristics such as a material weakening in its financial flexibility. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Overland Park, the second largest city in Kansas, is an affluent community located within the Kansas City metropolitan area.

STRONG ECONOMIC BASE

The city benefits from its location, extensive transportation network, and well-educated workforce, which drive continued growth of the diverse local economy. The city is home to several Fortune 500 companies, with Sprint as its leading employer. Both the financial services and professional and business service sectors account for a greater percentage of total countywide employment than the national average. The city's workforce is highly educated, with 58% attaining higher education versus 29% nationally.

Continued economic growth is evidenced by the below average unemployment rate, steady sales tax growth, and increases in AV. The city's June 2015 unemployment was low at 3.9%, bettering the state's rate of 4.7% and the 5.5% national average. After three years of small gains in taxable AV, the city has experienced two years of extensive growth, increasing 7.1% in 2014 and 6.2% in 2015. Further growth is expected as management reports ongoing substantial permitting activity.

SOLID FINANCIAL OPERATIONS

The city finished 2014 with a $7.9 million general fund surplus, its third consecutive surplus after four consecutive years of operating deficits. The surplus increased unrestricted fund balance to $57.4 million or a healthy 41.3% of expenditures. The surplus was driven by a 4.3% increase in sales tax revenues and development fees finishing $2.9 million ahead of budget. Employees received 3% increases in salary, which they will again receive in 2015. The 2015 budget assumes a 3.7% increase in expenditures and some headcount growth, although the number of employees remains well below past highs. Another surplus is projected for 2015.

The city retains revenue raising flexibility as it has not raised its millage since 2012 and tax rates are well below neighboring communities. Multi-year forecasts show essentially balanced operations going forward.

MODERATE LONG-TERM LIABILITIES

Aggregate debt levels are manageable at $3,236 per capita and 3.1% of market value. Debt levels are likely to decrease as minimal additional debt is planned and principal amortization is rapid with 80% repaid within 10 years.

The city participates in the Kansas Public Employees' Retirement System (KPERS), a cost-sharing multi-employer plan, for which the city has made all required payments. KPERS was weakly funded at 60% as of Dec. 31, 2013, or an estimated 54% when adjusted by Fitch to reflect a 7% discount rate, suggesting likely increases in future required payments.

The city also maintains two smaller single-employer defined benefit plans for police and fire, and a defined contribution plan. Reflecting a 7% discount rate, the police and fire plans are 85% and 65% funded, respectively. The city has pre-funded a portion of its OPEB liabilities. The plan was 19.5% funded as of Dec. 31, 2013. Carrying costs for debt service, pension and OPEB were moderate at 16% of 2014 governmental funds spending.

Additional information is available at 'www.fitchratings.com'.

Fitch recently published an exposure draft of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated September 10, 2015). The draft includes a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to fewer than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published by Jan. 20, 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. We anticipate the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date.

In addition to the sources of information identified in the 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.

Applicable Criteria

Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869942

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

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990722

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990722

Endorsement Policy

https://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/20150911005865/en/

Fitch Ratings
Primary Analyst
Eric Friedman
Director
+1-212-908-9181
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Arlene Bohner
Senior Director
+1-212-908-0554
or
Committee Chairperson
Steve Murray
Senior Director
+1-512-215-3729
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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