AUSTIN, Texas--(BUSINESS WIRE)--As part of its continuous surveillance efforts, Fitch Ratings has affirmed the following general obligation (GO) bond rating for Ellis County, Texas (the county):
--$61 million GO bonds at 'AA' (excluding series 2010 GO refunding bonds which are not rated by Fitch).
The Rating Outlook is Stable.
RATING RATIONALE:
--Ellis County maintains a stable financial position and sizeable reserves, aided by conservative financial management practices.
--Historically solid tax base gains resulting from high levels of primarily residential growth have dwindled in light of overall weaker economic conditions.
--The tax rate is moderate and the county maintains significant financial flexibility in its various tax levies.
--The county benefits from its proximity to the larger Dallas-Fort Worth economy and employment base.
--The direct debt burden is low. Assisted by pay-go capital spending, the county's capital needs appear manageable. Overall debt levels are high.
KEY RATING DRIVER:
--Maintaining solid reserve levels to balance operating pressures associated with an expected return of primarily residential development as the economic recovery strengthens will be integral to maintaining credit quality.
SECURITY:
The bonds are secured by a limited ad valorem tax pledge of the county, not to exceed $0.80 per $100 of taxable assessed valuation (TAV).
CREDIT SUMMARY:
Ellis County is located in north central Texas, immediately south of and accessible to the larger Dallas-Fort Worth metro economy and employment base. Affordable land along major highways spurred residential development over the past decade, which in turn fueled rapid population growth since 2000. Nonetheless, portions of the county remain rural in nature. While primarily affordable residential development has driven recent growth trends, the county also maintains a historically stable industrial base of cement and steel manufacturers as well as various large distribution centers that represent some of the county's largest taxpayers. In light of the recent economic downturn, development activity has tapered off to generally flat levels. Historically solid tax base gains from fiscal years 2003-2009 that have averaged just over 10% annually halted in fiscal 2010. A very minimal gain of 1% was realized in fiscal 2010 along with a similarly-sized decline in fiscal 2011. Management currently is projecting another modest decline in assessed valuations for fiscal 2012 followed by modest, near-term tax base gains in line with the pace of overall economic recovery.
Despite generally weaker economic conditions, the county's financial profile remains stable, characterized by sizeable reserve levels. Since fiscal 2002, general fund reserves have remained at no less than 21% of spending. Even with a moderate drawdown on reserves for the first time since fiscal 2002, fiscal 2009 results reflected approximately $8.2 million in unreserved general fund balance or a solid 23% of spending. Management projects year-end fiscal 2010 general fund results that incorporate another moderate drawdown of approximately $600,000 (due in part to pay-go capital spending) that would bring reserve levels to roughly $7.6 million or 21.5% of spending. General fund spending remained fairly flat in fiscal 2011 at $35.4 million; management tightened staffing levels and reduced its contribution to the employees' pension program while maintaining the same overall tax rate for the fourth fiscal year. It is currently anticipated that fiscal 2011 general fund reserve levels will remain on par with expected prior year results.
Overall debt levels are high at approximately 6.5% of market value or $5,640 on a per capita basis, due in large part to local school district debt. However, direct debt levels for the county are low at less than 1% of market value or $415 per capita, assisted in part by significant pay-go capital spending. In addition, the county's capital needs have been generally modest due to the more limited scope of responsibilities for a Texas county. Principal amortization is average at 50%.
The county has no remaining bond authority and has no plans to return to voters. The county's last bond authorization for $54 million was approved by voters in May 2007 primarily for a new justice and detention center, which is now expected to meet the county's needs for the next 10 to 15 years.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's report 'Tax-Supported Rating Criteria', this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc, and IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', (Aug. 16, 2010);
--'U.S. Local Government Tax Supported Rating Criteria', (Oct. 8, 2010).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.