Fitch Ratings takes the following rating action on Travis County Emergency Services District #1 (the district) as part of its continuous surveillance effort:
--$1.5 million outstanding limited general obligation bonds, series 2002, upgraded to 'BBB+' from 'BBB'.
The Rating Outlook remains Stable.
RATING RATIONALE:
--The upgrade reflects improved liquidity ratios and tax collection rates since bond issuance, consistent tax base growth within this single-purpose district, and consistent maintenance of solid unreserved general fund balances.
--The rating further reflects Austin's resilient area economy, demonstrating low unemployment, above-average household wealth levels and strong local housing markets despite the national recession.
--Also incorporated into the current rating is the very limited financial flexibility due to the district operating at maximum taxing capacity, high levels of overall net debt, and reliance on continued residential real estate development for future growth.
KEY RATING DRIVERS:
--Tax base growth, in line with the district's future service needs;
--Maintenance of healthy fund balance levels, as an indication of successful expense control.
SECURITY:
The bonds constitute a general obligation of the district secured by a limited continuing direct ad valorem tax levied against all taxable property within the district.
CREDIT SUMMARY:
The district provides fire protection and emergency services to several communities located adjacent to Lake Travis, approximately 20 miles northwest of Austin. The area is heavily residential and characterized by lake-front and lake-view properties.
The district's financial position is currently sound, with fiscal 2009 unreserved fund balances projected at $0.5 million (23.5% of annual spending and transfer out), representing over 90 days of operating costs. These reserves have been maintained successfully, not falling below 22% of annual spending since 2002. Liquidity has improved since the bonds were issued, with the obligor's quick ratio (cash and investments over total liabilities) strengthening from 1.6 times (x) to 2.2x. Tax collection rates are also significantly improved, from 92% current collections in 2002 to 97% in audited 2008. However, the district's financial flexibility remains very limited, since it already taxes at its maximum legal capacity of $0.10 per $100 of assessed value. The district's financial position will remain dependent on continued tax base growth to provide a growing ad valorem property tax levy in line with its future service needs.
The district's tax base has grown strongly over the last six assessment years, at a compound annual rate of 11.2%, although the rate of growth has been slowing since the 2006 tax year. While the district's population is not measured by the census; district officials estimate the population at roughly 18,500. Its largest service community of Jonestown has seen its population grow strongly, at a compound annual rate of 8% since 2004, indicating both tax base strength and increasing demands for service. Unemployment throughout Travis County remains low at 6.6%, consistent with jobless levels during the 2002 recession, and county per capita income levels run approximately 10% higher than state and Austin metro area medians. Fitch housing data indicate that local housing markets are performing extremely well relative to the national climate.
With the exception of a $300,000 bank loan for a remodeling project under consideration, the district has no current plans to issue more debt; management plans to finance necessary equipment maintenance and purchases on a pay-as-you-go basis. Overall net debt as a share of its tax base is high at 4.8% of assessed value, although direct debt is a very low 0.1%.
These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:
--'Tax-Supported Rating Criteria', dated Dec. 21, 2009;
--'US Local Government Tax Supported Rating Criteria', dated Dec. 21, 2009.
Additional information is available at 'www.fitchratings.com'.
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Contacts:
Fitch Ratings
Tom Cowell, 212-908-9130, New York
Steve Murray,
512-215-3729, Austin
or
Media Relations:
Cindy Stoller,
212-908-0526, New York
Email: cindy.stoller@fitchratings.com