Nov 20 - Fitch Ratings has affirmed its 'AA+' rating on the following
Abilene, Texas (the city) bonds:
--$52 million outstanding general obligation (GO) bonds;
--$54 million outstanding combination tax and revenue certificates of obligation
The Rating Outlook is Stable.
The GO bonds and COs are secured by a continuing direct ad valorem tax levied
against all taxable property within the city, subject to a $2.50 per $100
assessed valuation limitation prescribed by law; the COs are secured further by
a pledge of the net revenues of the city's water and sewer system, not to exceed
KEY RATING DRIVERS
PRUDENT FINANCIAL MANAGEMENT: The city's management has demonstrated
conservative stewardship and commitment to adhere to policies, practices which
have contributed to the city's strong financial position.
SALES TAX DEPENDENCE: The city relies heavily on sales tax revenues for
operations. But Fitch notes the city's high reserve levels tempers risk to
volatility in sales tax performance.
MODEST DEBT BURDEN: Overall debt levels are low, assisted by substantial state
support for overlapping school district debt. Direct debt is rapidly amortized
and the city's near term capital needs are manageable.
STABLE LOCAL ECONOMY: Located in West Texas, the city serves as a commercial,
educational, and cultural hub. The area economy demonstrated resiliency during
the recession as growth, although modest, resumed and taxable assessed valuation
(TAV) gains were recorded in each of the last five years. Unemployment rates
typically are lower that state and national levels but wealth levels trail the
state and nation.
STRONG FINANCIAL POSITION ENABLED BY PRUDENT MANAGEMENT
The city's financial profile is sound with strong general fund balance reserve
levels and limited capital requirements. In fiscal 2009, the city promptly
restored its unreserved general fund balance after falling slightly below its
formal target for two years. The city maintains a minimum 20% reserve policy
with an optimum target at 25%. For fiscal 2010, tight budgetary measures
contributed to the city's ability to further add to fund balance despite a
modest decline in revenue.
Economically sensitive sales tax receipts typically comprise around 40% of total
revenues in the general fund. In fiscal year 2011, the city's receipts jumped
roughly 17% from the prior year level. However, this hike was identified as a
non-recurring activity and the revenue increase was prudently reserved for
non-recurring capital outlays.
The unrestricted general fund balance at fiscal 2011 year-end was $25.1 million
or 36.1% of spending and transfers out. The reserves in excess of policy level
were used during fiscal 2012 to fund two years' worth of capital projects
instead of issuing COs as previously planned. Similar sales tax receipts were
generated in fiscal 2012. Accordingly, the increment identified as non-recurring
is being reserved for pay-go outlays. The fiscal 2013 budget is structurally
LOW DEBT LEVELS WITH MANAGEABLE CAPITAL NEEDS
Abilene has a modest overall debt burden at just under 2% of market value (MV)
and less than $1,000 per capita. Notably, these ratios benefit from the city's
ability to fund its last two years of capital projects with cash reserves and
are adjusted to account for state support of overlapping school district debt at
roughly 30%. Principal amortization of direct debt is well above average at over
80% in 10 years. The city's 2012-2016 capital plan is a manageable $10 million.
The city participates in the Texas Municipal Retirement System (TMRS), with an
adequate fiscal year 2011 funded position of 92% based on a conservative assumed
7% investment rate of return. The city provides supplemental death insurance as
its only other post-employment benefit (OPEB) provided to active employees and
retirees. This benefit is also administered by TMRS; the annual contribution is
nominal and has not exceeded $50,000 in any of the last three years. The city's
carrying costs, including debt service, pension and OPEB contributions are
considered moderate at 21% of fiscal 2011 spending.
TAX BASE GROWTH
The city's tax base is diverse and grew by a compound annual growth rate (CAGR)
of nearly 5% between fiscals 2007 and 2012 despite the economic slowdown and
without one single year of decline. Some of the increase in TAV was driven by
commercial investment (most notably in the healthcare sector), as well as
residential valuations that held up well in Abilene. Additionally, located just
outside of the city is the Horse Hollow Wind Energy Center, considered to be the
world's largest wind development with 421 turbines spread across roughly 60,000
acres. This development has attracted various wind energy companies to set up
manufacturing and support operations within the city.
ECONOMIC HUB IN RURAL AREA
Abilene is located 150 miles west of Fort Worth, along Interstate 20, in Taylor
County. The estimated city population is 117,000, including about 6,100 military
and civilian personnel stationed at Dyess Air Force Base. The city's primary
employment sectors are government, education, healthcare, and retail. The city
is home to two public hospitals and six higher education institutions including:
Abilene Christian University (enrollment of 4,000), Hardin Simmons University
(2,500), McMurry University (1,400), Cisco College (2,500), Texas Tech
University School of Nursing, and Texas State Technical College. While the
city's wealth levels are below the state and nation, the unemployment rate (6.5%
for July 2012) is typically better than that of the state and U.S.