Fitch Upgrades Mansfield, Texas' GOs and COs to 'AA+'; Outlook Stable

Fitch Ratings assigns an 'AA+' rating to the following Mansfield, Texas (the city) general obligation bonds (GOs) and certificates of obligation:

--$13.285 million GO refunding bonds, series 2015;

--$18 million combination tax and revenue COs, series 2015.

The GOs and COs are scheduled for a negotiated sale the week of Dec. 8. Proceeds of the GO bonds will be used to refund certain outstanding obligations for interest savings. CO proceeds will finance street improvements, vehicles, and library, city council chamber, and parking improvements.

In addition, Fitch upgrades the city's $102.2 million (pre-refunding basis) outstanding general obligation (GO) bonds and COs to 'AA+' from 'AA'.

The Rating Outlook has been revised to Stable from Positive.

SECURITY

The GO bonds and COs are secured by a limited ad valorem tax levied against all taxable property in the city; the COs are secured further by a pledge of net revenues of the city's water and wastewater system, not to exceed $1,000.

KEY RATING DRIVERS

GROWING, DIVERSIFIED ECONOMY: The upgrade primarily is due to the city's diverse and expanding tax and employment base and near term economic prospects. Mansfield benefits from being in the Dallas-Fort Worth regional economy, and Fitch expects the area's well-developed transportation infrastructure and easy access to the DFW metroplex will foster additional growth in the city.

STRONG FINANCIAL PROFILE: The city's consistent financial performance contributes to maintenance of sound reserves despite growth pressures.

ABOVE-AVERAGE DEMOGRAPHICS: Income and educational assessment levels trend well above average. Participation in the strong regional economy and the city's expanding job base contribute to a low unemployment rate.

HIGH DEBT LEVELS: High overall debt and associated carrying costs (debt service, pension and other post-employment benefits) reflect the community's growth pressures but have not materially impacted operations. Retiree obligations are soundly funded.

RATING SENSITIVITIES

SOUND FINANCES; MANAGEABLE DEBT: The rating is sensitive to shifts in fundamental credit characteristics including the city's ongoing sound financial management. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Mansfield is located within the ninth largest metropolitan area in the nation, with 1.1 residents located within a 15-mile radius. The city's estimated population of 61,000 has more than doubled since the 2000 census. A significant amount of developable land remains within Mansfield's 38.6 square mile boundary.

FAST GROWTH COMMUNITY

The city is bounded by Fort Worth and Grand Prairie, whose GO bonds are rated 'AA+' by Fitch with a Stable Outlook, and Arlington, whose GO bonds are rated 'AA+' with a Positive Outlook by Fitch. Located in the southeastern portion of Tarrant County, the city is directly connected to nearby Dallas and Fort Worth, the DFW International Airport and surrounding communities by a robust and expanding transportation network.

Median household income is a high 174% of the national average; wealth as measured by per capita money income is also above average at 124% of the U.S. average. The city's levels of educational attainment trend well above average and contribute to a low unemployment rate of 4.6% as of August 2014.

The city's five industrial parks are home to a reported 115 industries employing 5,742 workers, with expansion plans underway, including those by Klein Tools (manufacturer of high-quality hand tools), Mouser Electronics (a Berkshire-Hathaway company and distributor of electronic parts), and BCB Transport (transportation services and warehousing).

A notable medical and health services presence is evidenced by Methodist Hospital's presence, with facilities currently valued at $180 million. The hospital system reportedly has plans for future expansion on a 22-acre site. Hospital Corporation of America and Texas Health Resources also are reportedly slated for future hospital development totaling $227 million.

Fiscal 2013 building permit values doubled year over year, led by various new commercial projects that include retail, restaurants, grocers, industrial and medical district expansions. To date, city officials have remained ahead of the growth curve in terms of service provision; Fitch will continue to monitor the impact of growth pressures on the city's infrastructure and operations.

DIVERSE AND EXPANDING TAX BASE

Fiscal 2015 market value of $5.5 billion (a solid $90,000 per capita) is 63% residential, with a growing commercial and industrial base representing 28% of total value. The top 10 taxpayers are varied and comprise a moderate 9.6% of fiscal 2015 taxable assessed valuation (TAV). TAV expanded by a compound annual growth rate (CAGR) of 5.6% between fiscal 2006 and 2015.

Although residential growth slowed during the recession, commercial development largely offset a stalled housing market; solid TAV growth resumed in fiscal 2012. The tax base realized 5.3% CAGR subsequent to the recession; fiscal 2015 TAV grew by a healthy 6.6% to $5 billion. The city's long-term plan assumes annual TAV increases of 3% to 4% in the near term, consistent with the number of new housing starts and other development activity underway and announced.

SOUND FINANCIAL PERFORMANCE

The city typically outperforms its conservative budget and maintains sizeable reserve levels in compliance with its 25% policy target. The city completed fiscal 2013 with unrestricted reserves equal to 26.2% of spending and anticipates comparable results for fiscal 2014.

The fiscal 2015 budget is balanced. The long-term plan anticipates moderate growth, consistent with regional trends, a constant tax rate and maintenance of strong reserve levels. Fitch considers these projections reasonable based on the city's history of sound fiscal management.

HIGH DEBT; WELL-FUNDED RETIREE LIABILITIES

Fitch expects the city's high overall debt, at 8.8% of fiscal 2014 market value, to remain a credit concern as a result of substantial overlapping school district debt. Above average carrying costs equal to 26% of fiscal 2013 governmental spending partly reflect a rapid tax-supported amortization rate of 66% in 10 years.

The city's general government capital plan is focused on street improvements. Over a 10-year period, the plan includes about $80 million of new GO debt, which is less than the city's current principal amortization over the same period. Fitch will continue to monitor the city's debt profile; a decline in economic growth and taxable values could pressure the city's debt burden.

The city participates in the Texas Municipal Retirement System and reported a solid fiscal 2012 funded position of 85.3% (based on an estimated investment rate of 7%). The city provides OPEB to retirees for health insurance and fully funds its annual required contribution each year; the city also established an OPEB trust in 2008. Its unfunded actuarial accrued liability is a minimal $7.4 million.

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=931175

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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.