December 19, 2012 / 5:26 PM / in 5 years

TEXT - Fitch affirms Granbury, Texas GOs

Dec 19 - Fitch Ratings has affirmed its 'AA' rating on the following
Granbury, TX's (the city's) debt obligations:

--$9 million general obligation (GO) bonds; 
--$16.4 combination tax and revenue certificates of obligation (COs).

The Rating Outlook is Stable.


The GO bonds and COs are secured by an annual property tax levy limited to $2.50
per $100 taxable assessed valuation (TAV). The COs are additionally secured by a
pledge of net revenues of the city's water, sewer and electric utility system. 


PRUDENT FINANCIAL MANAGEMENT: The city's financial profile is characterized by 
substantial reserves and generally positive operating results. Structural 
balance was achieved during the recession through expenditure reductions and 
officials have maintained lean operations with continuing cost savings.   

SALES TAX RELIANCE: Credit concerns over the city's reliance on economically 
sensitive sales tax receipts for operations are partially offset by its large 
financial reserves, conservative budgeting, and demonstrated ability to make 
significant mid-year budget adjustments. Additionally, a low property tax rate 
provides flexibility in the event the city needs to adjust its revenue 
composition in the future.  

MANAGEABLE DEBT BURDEN:  The city's overall debt level is expected to remain 
moderate as the city has no future debt plans.  Near term governmental capital 
needs are supported by series 2011 bond proceeds, third-party grants and general
fund monies. 

STABLE LOCAL ECONOMY:  The local economy is sound, serving both as a bedroom 
community of Forth Worth and as a growing business center for Hood County. 
Tourism and recreation also benefit the city's employment and sales tax base. 
Government, education and medical service providers are among the leading 
employers, lending stability to the city's employment base.  


Granbury is located 25 miles southwest of Fort Worth with an estimated 2011 
population of 8,050, representing a large 40% increase from the 2000 census 


Granbury serves as the county seat and retail hub for Hood County and the 
surrounding area, drawing more than 60,000 people from within a 10 mile radius 
to the city's big-box stores.  Lake Granbury, running through the historic 
downtown, and the 18,000 square-foot Granbury Resort Conference Center attract 
visitors from outside the region, also contributing to the city's sales tax 

Proximity to the metroplex, land affordability and lake access support a growing
commuter and retiree population. New construction has stabilized the city's TAV 
during fiscal 2011 and 2012 on the heels of 15% average growth during the 
preceding four years. Fitch views management's expectation for 5% annual tax 
base growth over the next several years as somewhat optimistic but recognizes 
residential and retail development underway should support positive momentum.   

Commercial and industrial property comprises 27% of the city's tax base.  The 
city has moderate taxpayer concentration with the top 10 taxpayers making up 
9.5% of total TAV, represented primarily by real estate, retail, and health care
organizations.  Soon to be completed transportation projects including 
completion of Northeast loop 567 and airport expansion projects (additional 
hangars and a runway extension to better accommodate corporate jets) bode well 
for the city's future growth prospects.  



Sales tax receipts provide 56% of the city's operating revenues, followed by 
property taxes (15%), franchise taxes (14%), fees and service charges (7%). 
Sales tax receipts increased by a total of 28% during fiscal 2007 and 2008 
before registering a 16% loss during the next two years reflecting the impact of
the recession on the general economy.  Officials trimmed expenditures, primarily
through reduced capital outlays and a hiring freeze to achieve structural 
balance and maintain the city's reserves.

Fiscal 2011 sales tax receipts of $5.8 million are up 9% year-over-year 
reflecting new retail establishments opened during the year and improvement in 
the local economy.  Growth in property and franchise tax revenues and cost 
savings also contributed to a $1 million (10.4% of spending) net operating 
surplus.  The unrestricted general fund balance of $4.2 million represents a 
high 43.4% of spending and transfers out and an important mitigant to inherent 
revenue volatility. Fitch expects reserve levels to remain at or above the 
city's policy minimum of 25% of spending and for operations to remain balanced. 

Management estimates an operating surplus after transfers of approximately 9% of
spending in fiscal 2012, attributed to additional strengthening of sales tax 
receipts coupled with cost savings which allowed the city to fund several 
one-time projects.  Fiscal 2013 year-to-date performance positions the city to 
outperform their budget which is based on an approximate 2% operating surplus 
after transfers.  


Overall debt is moderate at 2.9% of market value but higher per capita at $4,824
given the smaller population. Principal amortization is just above average at 
60.5% in 10 years. Near term capital expenditures are focused on airport hangars
to meet a strong demand from private and corporate interests, park and street 
improvements. Carrying costs for debt service, pension actuarially required 
contributions and OPEB paygo attributed to governmental operations total $3.6 
million, or 26.8% of fiscal 2011 spending.  

Granbury's pension plan is provided through the Texas Municipal Retirement 
System (TMRS), with an adequately funded position of 76.4% as of Dec. 31, 2011, 
based on the TMRS investment rate assumption of 7%. The city provides other 
post-employment benefits (OPEB) to retirees in the form of health care benefits 
through a single employer self-funded plan. The unfunded actuarial accrued 
liability (UAAL) for the city's OPEB is a small $198,487 as of Dec. 31, 2010 
representing a negligible amount of the city's market value.

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