Fitch Ratings assigns a 'AAA' rating to the following
obligations of the town of Flower Mound, Texas (the Town):
--$3.1 million certificates of obligation (COs) series 2015.
The COs are expected to price via competition on April 8,
pending market conditions. Proceeds from the COs will be used for
park facility, streets, drainage, water and sewer improvements.
In addition, Fitch affirms the 'AAA' rating for the town's
$119.3 million in outstanding limited tax obligations - GOs and
certificates of obligation (COs).
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 shifts in
fundamental credit characteristics including the town's ongoing
strong financial management and sound reserves. The Stable Outlook
reflects Fitch's expectation that such shifts are highly
unlikely.
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 comprised primarily of
high-end residential (70%) and commercial and industrial properties
(13%) 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, but realized a gain of 4.6% in fiscal 2014
and 8.5% in fiscal 2015 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 Jan. 2015 is a low 3.7%,
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 report fiscal 2015 fiscal year to date
performance favorable to the structurally balanced budget. The
fiscal 2015 budget and five year 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 5.6% of market value. At
12.7% of governmental spending, the debt service burden on the
budget is also modestly elevated due to a rapid rate amortization
of 75% within 10 years.
The town's fiscal 2014 general government five-year capital plan
is manageable at about $135 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 $53
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 16.7% 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 and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug.
14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982333
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Fitch RatingsPrimary AnalystRebecca Meyer, CFA,
CPADirector+1-512-215-3733Fitch Ratings, Inc.111 Congress Ste.
2010Austin, TX 78701orSecondary AnalystShane
SellstromAnalyst+1-512-215-3727orCommittee ChairpersonArlene
BohnerSenior Director+1-212-908-0554orMedia RelationsElizabeth
Fogerty, New York,
+1-212-908-0526elizabeth.fogerty@fitchratings.com