AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings to Williamson County, Texas' bonds:
--$153.165 million limited tax refunding bonds, series 2012 'AAA'.
The bonds are scheduled for a negotiated sale the week of March 5, 2012. Proceeds from the refunding bonds will be used to refund portions of the county's outstanding debt for interest savings.
In addition, Fitch affirms the 'AAA' rating on the following county bonds:
--$373.3 million unlimited tax bonds outstanding;
--$288.8 million limited tax and pass-through toll revenue obligations outstanding.
The Rating Outlook is Stable.
SECURITY
The bonds are limited tax obligations payable from the county's $0.80 constitutional tax rate. The pass-through toll revenue bonds are payable from payments received by the county pursuant to a pass-through toll agreement between the county and the Texas Department of Transportation (TxDoT) and are also secured by a property tax limited to $0.80 per $100 of TAV. The outstanding unlimited tax bonds are secured by an unlimited ad valorem tax levied against all taxable property in the county.
KEY RATING DRIVERS
EXEMPLARY FINANCIAL PROFILE: Despite growth pressures, financial performance has consistently been strong, benefiting from conservative fiscal stewardship and budgeting practices. The county maintains ample reserves in a number of funds, well in excess of stated policies.
STABLE REGIONAL ECONOMY: While not immune from the effects of the economic downturn, the Austin metropolitan employment base is broad and continues to outperform much of the country. The county's own economy continues to diversify, with unemployment rates below state and national averages.
SLOWING TAX BASE GROWTH: Taxable assessed valuation (TAV) growth had been solid, spurred by affordable home prices and ample developable land, but growth slowed beginning in fiscal 2010. Wealth indices are above average, and the population continues to record steady gains.
HIGH OVERALL DEBT: Direct debt ratios are moderate, although overall levels are high, reflecting issuance by the large number of fast-growing school districts, cities, and special districts within the county.
CREDIT PROFILE
ROBUST ECONOMIC GROWTH DESPITE SLIGHT MODERATION
Williamson County has been one of the fastest growing counties in the state and nation. Currently estimated at more than 420,000, the county's population has grown nearly 70% since 2000, fueled by its location within the growing and diverse Austin metropolitan economy as well as the availability of ample and affordable housing.
The county's TAV experienced double-digit growth from fiscal 2006-2009. However, in fiscal 2010, the county's TAV growth slowed considerably, primarily due to a reduction in personal property values (i.e. inventory). TAV posted a modest decrease of 1% for fiscal 2011 to roughly $33.4 billion but reversed course with a nearly 2.5% increase for fiscal 2012. Property tax collections remain strong, with fiscal 2011 collection rates consistent with historically strong levels.
The county's own economic base has grown significantly within the last decade. Substantial population gains and residential development have resulted in expansion of the retail, higher education, and healthcare sectors. Williamson County also benefits from the number of large high technology (high tech) firms located within the area, including the corporate headquarters of Dell Inc. (Fitch Issuer Default Rating of 'A' with a Stable Outlook).
While there has been some contraction in high tech manufacturing, county and regional unemployment rates remain below state and national averages. The December 2011 county unemployment rate was 6.5%, improved from last year's rate at that time, and below the 7.2% and 8.3% rates of the state and nation, respectively. In addition, the county's residential employment base continues to grow, with a 1% increase posted for 2011. Median household income figures for the county are significantly higher than the state and U.S. averages.
STRONG RESERVES
The county's financial position and conservative fiscal stewardship remain important credit strengths. The county consistently posts unreserved general fund balances well in excess of its 30% minimum policy goal. For the close of fiscal 2010, the county recorded an unreserved general fund balance of $59 million, or 50% of spending.
In addition, the county maintains high reserve levels in the debt service and road and bridge funds. Unaudited fiscal 2011 results indicate a roughly $9.3 million increase to general fund balance, up from the $4 million surplus projected earlier. Management reports this result is due to better than budgeted performance for both revenues and expenditures.
The fiscal 2012 budget was balanced without layoffs, a hiring freeze, or any program reductions. Historically, the county has utilized a portion of its beginning balance to offset budgetary shortfalls. However, through conservative budgeting practices and a solid revenue performance, county administrators now are anticipating favorable operating results for the year.
HIGH DEBT BURDEN
The county's direct debt burden on the budget is elevated at 33% of fiscal 2010 spending and the pace of principal amortization is average. High overall debt levels reflect significant issuance by the 16 school districts, 25 special districts, and 13 cities located or partially located within the county; overall debt currently is $7,950 per capita or 8.8% of total market value. County officials reported only minor additional capital improvement projects planned for the medium term.
AFFORDABLE PENSION LIABILITIES
The county provides pension benefits through the Texas County and District Retirement System (TCDRS). Funding levels are satisfactory at nearly 85% (77% using a more conservative 7% investment return assumption), and the county routinely funds 100% of its annual required contribution (ARC) to TCDRS. In fiscal 2010 the county paid $7.6 million into TCDRS, or a manageable 7% of spending.
The county provides other post-employment benefits (OPEB) through a self-funded single-employer plan. Funding has been very low over the past three fiscal years, with contributions well under the ARC (10% in fiscal 2010). Fitch notes the low funding levels as an ongoing credit concern. However, concerns are mitigated in part due to the relatively small OPEB liability; the unfunded actuarial accrued liability is still modest at $36.5 million, or a manageable 52.4% of covered payroll.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
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, Zillow.com, National Association of Realtors, Underwriter, Bond Counsel, Underwriter Counsel, Trustee, and the Municipal Advisory Council of Texas.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 15, 2011);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842
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.