The bonds are scheduled for a competitive sale on Oct. 29, 2013. Proceeds will finance various street, drainage, water and waste water improvements.
In addition, Fitch affirms approximately $30.5 million outstanding general obligation (GO) bonds and COs at ‘AA-‘.
The Rating Outlook is Stable.
The bonds and COs are direct obligations of the city payable from ad valorem taxes limited to $2.50 per $100 of taxable assessed valuation (TAV). The COs are further secured by a pledge of surplus net revenues of the city’s water and sewer system.
KEY RATING DRIVERS
AUSTIN-AREA HIGH GROWTH: Bastrop participates in the robust population and tax base growth characteristic of the greater Austin area. Growth prospects remain strong given the city’s location along the highway 71 corridor to Houston.
WELL-MANAGED FINANCES: Finances are structurally balanced and typically outperform the budget. The city maintains sound reserve levels which help to mitigate above-average sales tax exposure.
MANAGEABLE DEBT PROFILE: The city’s overall debt is above average, although its carrying costs (debt service, pension and other post-employment contributions) are moderate. Near term capital needs are modest.
ABOVE AVERAGE ECONOMIC METRICS: Income and wealth trend above average. A low unemployment rate reflects both the city’s growing commercial presence and proximity to Austin’s broad employment base.
CHANGE IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics including the city’s sound financial management practices.
The city is the county seat of Bastrop County, located about 30 miles southeast of Austin with a 2013 population of about 7.500.
EXPANDING ECONOMIC BASE
Bastrop’s location 23 miles east of Austin Bergstrom International Airport (ABIA) along the Highway 71 corridor to Houston has spurred retail and commercial development reflected in a tripling of taxable assessed valuation (TAV) since the year 2000. Following two years of moderate growth, a 10% gain in fiscal 2014 TAV reflects a surge in retail and commercial expansion. Officials anticipate moderate tax base growth over the next couple of years based on development underway and in the pipeline. Representing retail, hotel, automobile dealerships and real estate, the city’s top taxpayer concentration is moderate at 15.5% of total TAV.
Public education, local government, a prominent medical research facility, and utility providers lend stability to the city’s employment base. County unemployment levels approximate those of the state; 6.9% as of July 2013. The city’s median household income runs about 10% higher than the state and 6% above the U.S. level.
SOLID FINANCIAL MANAGEMENT
Sales tax revenues contribute 34% to the city’s total revenues, followed by property tax revenues at 23%. Combined, the city’s tax revenues grew at a compound annual rate of 11.5% over the past five years during which time officials managed costs to maintain sound reserves in excess of their 25% policy level.
Fiscal 2012 revenue gains, led by sales tax revenues, combined with attrition savings to increase the city’s general fund balance by $1.2 million. Year-end unrestricted reserves of $3.3 million represent 39.4% of expenditures and transfers out, providing a credit mitigant to the city’s sales tax exposure. Officials estimate further growth in reserves during fiscal 2013 to approximately $4.1 million, a moderate portion of which the city has committed to capital and nonrecurring expenditures in its fiscal 2014 budget.
HIGH DEBT; WELL-FUNDED PENSIONS
Fitch anticipates overall debt, currently 8.7% of market value, to remain elevated given remaining build-out anticipated in the region. The city’s principal amortization is rapid at 62% in 10 years. City officials anticipate seeking GO authorization in 2015.
Bastrop participates in the Texas Municipal Retirement System (TMRS) and fully funds its annual required contributions. The city’s pension funding level is sound at 81.6% (reflecting a 7% investment rate assumption). Its other post-employment benefit (OPEB) obligation is negligible in relation to market value. Fiscal 2012 carrying costs, including debt service, pension and OPEB contributions represent a manageable 19% of governmental 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, Core-Logic /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
U.S. Local Government Tax-Supported Rating Criteria