OREANDA-NEWS. Fitch Ratings has assigned the following rating for the city of Lewisville, Texas (the city) general obligation (GO) debt:

--\\$23 million series 2015 GO refunding bonds 'AAA'.

Fitch currently rates the city's \\$85 million GOs and combination tax and revenue certificates (COs) on a pre-refunding basis at 'AAA'.

The Rating Outlook is Stable.

SECURITY
The GO bonds and COs are payable from an ad valorem tax limited in amount to \\$2.50 per \\$100 of taxable value by the state constitution and the city charter. The COs are additionally secured by a subordinate lien on the surplus revenues of the water & sewer system.

KEY RATING DRIVERS
STRONG FISCAL OPERATIONS: Management has prudently managed costs in line with revenue growth and typically outperforms the budget. A history of operating surpluses, limited general government capital needs and a resilient tax base have afforded the city a high level of liquidity.

FINANCIAL FLEXIBILITY: The city has significant financial flexibility as evidenced by strong fund balances, moderate tax rates, and annual transfers out of the general fund to support capital projects.

ELEVATED BUT MANAGEABLE DEBT: Fitch expects the city's debt burden to remain elevated based on substantial overlapping debt issuances reflecting regional growth needs. The impact of potential new money issuance on the debt burden is largely offset by a rapid amortization rate. Debt service, pension and other post-employment contributions place a moderate burden on the budget.

SOUND ECONOMY, TAX BASE: The largely residential tax base has more than doubled in the past 15 years, benefiting from proximity to Dallas-Fort Worth. Unemployment is low and income levels trend above average. Long-term economic prospects remain favorable given the city's strategic location.

RATING SENSITIVITIES
FINANCIAL STRENGTH: The rating is sensitive to maintenance of strong financial flexibility and a manageable debt burden consistent with the city's high 'AAA' rating.

CREDIT PROFILE
Lewisville is located northwest of Dallas along interstate highway (IH) 35 East, lying in parts of Dallas and Denton counties in the Dallas-Fort Worth metroplex. The city population for 2014 is approximately 101,000.

FINANCIAL PROFILE KEY CREDIT STRENGTH

Prudent fiscal management and sound economic growth have enabled the city to maintain strong reserve levels. The city realized a net surplus in five of the six past fiscal years. Fiscal 2014 unrestricted reserves of \\$31.2 million represent a strong 43.7% of spending, well above the city's 20% fund balance target.

Sales tax revenues comprise one-third of total general fund revenues, representing the second largest operating revenue source behind property taxes. Strong sales tax performance has allowed the city to keep its ad valorem tax rate moderate. Fiscal 2014 receipts rose by 6% to \\$23.5 million, with an indication of continuing fiscal 2015 gains. The sales tax base is broad and without taxpayer concentration.

The city's fiscal 2015 budget is structurally balanced. Management anticipates a fiscal 2015 fund balance of \\$30.3 million, approximately 41% of spending, reflecting appropriations for capital projects and project carryovers from fiscal 2014. The city has historically estimated conservatively and Fitch expects that to continue.

ELEVATED DEBT/MANAGEABLE CAPITAL NEEDS

The city's overall debt burden is elevated at 6.1% of market value due largely to debt of area school districts and municipalities. Amortization of the city's debt is rapid, with 78% of principal scheduled for repayment within 10 years. Lewisville's prudent policy of transferring a sizable amount of surplus revenues to fund capital projects helps maintain current debt levels and provides overall financial flexibility.

Lewisville expects to seek an estimated \\$117 million of GO authorization in November 2015 to fund capital projects prioritized by the city's Blue Ribbon Capital Projects/Vision 2025 Advisory Board. The city currently has only \\$87.4 million of limited tax debt outstanding, \\$77 million of which will be paid off in the next 10 years. The size and projected tax rate impact of the November authorization will be determined by council. Management projects a potential maximum increase of 2 cents over the city's low interest and sinking fund tax rate of \\$0.117 per \\$100 of taxable assessed value (TAV).

The city's 2003 bond election received strong community support. Fitch believes that in the event of a failed November election, the city has adequate reserves to meet its most pressing infrastructure needs over the near- to medium-term, although failure of the election would reduce general fund reserves to a level closer to the 20% policy floor.

Lewisville contributes at an actuarially-determined rate to the Texas Municipal Retirement System (TMRS) and provides post-employment health benefits to retirees. Fitch estimates that the plan is funded at 80% based on a 7% investment rate assumption. The city contributes a fixed dollar amount annually towards retiree health benefits. The sum of the city's unfunded OPEB liability (\\$870,000 as of Oct. 1, 2013) and unfunded pension liability (\\$47.5 million as of Dec. 31, 2013) make up less than 1% of fiscal 2014 market value.

The city's debt service, pension and OPEB contributions totaled 18% of fiscal 2014 governmental fund expenditures, placing a moderate burden on the budget.

CITY BENEFITS FROM POSITION IN LARGER DALLAS-FORT WORTH ECONOMY

The city is home to various manufacturing, distribution, and service concerns. Local unemployment rates historically have been lower than regional, state and national averages. The city's March 2015 unemployment rate of 3.5% was below the state and nation and improved from the same period a year earlier. Income and wealth trend above the Texas average and on par with U.S. averages.

The \\$7.4 billion TAV grew by a strong 7.4% in fiscal 2015 marking the fourth consecutive year of expansion following a two-year recessionary dip. The tax base is without concentration and continues to realize residential and commercial growth.

The city estimates that it is about two-thirds built out and expects the tax base to grow about 3% per annum over the five-to-10-year planning horizon. Fitch considers management's growth estimate reasonable based on strong preliminary fiscal 2016 values, regional trends, affordable land and ongoing infrastructure development to support the growth.