Fitch Rates Missouri City, Texas' 2008A GOs & COs 'A+'

AUSTIN, Texas--(Business Wire)--
Fitch Ratings has assigned an 'A+' rating to Missouri City, Texas'
(the city) $21.1 million general obligation bonds (GOs), series 2008A
and to the $14.5 million certificates of obligation (COs), series
2008A. Fitch also affirms its 'A+' rating on the city's outstanding
debt, comprising $26.8 million permanent improvement bonds, $10.9
million combination tax and revenue certificates, and $15.3 million in
GO bonds. The Rating Outlook is Stable.

Scheduled for a negotiated sale September 2nd, the bonds are
direct obligations of the city, payable from an ad valorem tax levied
against all taxable property in the city, limited to $2.50 per $100
taxable assessed valuation (TAV). The COs are additionally payable
from a pledge of surplus net revenues of the city's utility system.
Proceeds will be used to make improvements to municipal buildings,
drainage, transportation, parks and recreation facilities, water and
wastewater projects, as well as to pay issuance costs.

The 'A+' rating reflects the city's favorable direct debt profile,
solid financial reserves, and a diverse, growing tax base that is
accessible to the larger Houston economy. With the extension and
expansion of transportation corridors leading from Houston and
numerous high-end master planned communities in the city's
extra-territorial jurisdiction (ETJ), Fitch views Missouri City's
prospects for continued tax base growth as promising. Population
growth within the ETJ has been aided by development agreements between
the city and the planned communities. Although not within their tax
base, such developments serve to attract additional commercial and
industrial activity within the city's boundaries. Future annexation of
these communities once near completion in the mid- to long-term will
significantly enhance the city's property tax base without major
capital needs. These key rating drivers are offset somewhat by the
city's high overall debt burden, which is due primarily to the
substantial amount of overlapping municipal utility district (MUD)
debt.

Located 20 miles southwest of downtown Houston, the city is
located in northeastern Fort Bend County, one of the fastest growing
counties in the state. Encompassing only 30 square miles, its
estimated 2007 population of 74,000 grew a notable 40% since 2000. The
city's TAV has risen by an annual average of slightly more than 7%
since fiscal 2004. The city's tax base composition is overwhelmingly
residential, and while residential construction has slowed from its
prior pace, residential building activity is still ongoing according
to city officials. Commercial development has begun and continues to
grow in order to meet the retail needs of residents. Economic
development efforts by the city are attracting some industrial
concerns as well. Fort Bend County wealth levels are well above
average and the city's unemployment rate remains below state and
national averages.

About half of general fund revenues come from property taxes,
followed by sales taxes. Sales taxes have grown in recent years with
the arrival of big box retailers and actual results for fiscal 2008
are reportedly above last year's numbers. The city's finances are
characterized by large, undesignated general fund reserves, totaling
no less than 17% of spending since fiscal 2002. Audited fiscal 2007
results included another operating surplus and the city increased its
undesignated fund balance to $10.1 million or 37% of spending. The
city's fund balance policy requires the maintenance of undesignated
reserves equal to 15%-25% of revenues. Unaudited fiscal 2008 results
remain on target with earlier projections, which includes a modest
drawdown of roughly $655,000 on general fund balance reserves for
one-time capital expenditures. Another drawdown in the amount of $1.4
million is anticipated in the adopted fiscal 2009 budget primarily for
additional one-time capital needs, but these projections include
maintaining reserves at no less than the minimum required by city
policy. The fiscal 2009 budget will also include salary increases
across all employee categories. The city's five-year financial
forecast continues to project the maintenance of strong reserve levels
under conservative revenue growth assumptions, however.

The current offering is comprised primarily of the city's fifth
installment of a $75 million authorization approved by voters in
September 2003 to fund the city's 10-year capital improvement plan
(CIP). The tax rate impact of the entire authorization will be limited
to 4 cents per $100 TAV assuming modest tax base growth rates. The
city anticipates issuing approximately $10 million of the
approximately $33 million in remaining authorization within the next
year. Principal amortization has slowed with this issuance, but
remains above average at roughly 56% in 10 years. The city anticipates
approaching voters for an additional $17.5 million authorization for
parks and recreation facilities this November 2008.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, 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 Ratings, Austin
Rebecca Moses, 512-215-3739
Jose Acosta, 512-215-3726
or
Media Relations:
Cindy Stoller, 212-908-0526, New York

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