OREANDA-NEWS. Fitch Ratings affirms at 'AA-' the following city of Boerne, Texas (the city) general obligation bonds (GOs):

--\\$4.7 million GO refunding bonds, series 2011;
--\\$9.2 million GO bonds, series 2009;
--\\$690,000 GO bonds, series 2007.

The Rating Outlook is revised to Positive from Stable.

SECURITY
The GO bonds are a general obligation of the city, payable from the collection of property taxes levied against all taxable property within the city, subject to a constitutional limit of \\$2.50 per \\$100 assessed valuation.

KEY RATING DRIVERS

SOUND FINANCIAL PROFILE: The Positive Outlook recognizes Boerne's solid financial performance characterized by conservative budgeting and healthy reserves. Sizeable fund balances are a key credit mitigant to the city's above-average sales tax exposure.

EXPANDING TAX BASE: Additionally, the Positive Outlook reflects ongoing growth and diversification of the city's tax base. Market value per capita is high and the tax base has no concentration.

SAN ANTONIO MSA COMMUNITY: Boerne is nestled in the Texas Hill Country on Interstate Highway 10 (IH10), providing ready access to nearby San Antonio. The city's location attracts a notable tourism trade and increasing levels of commercial development. The city's income and wealth levels approximate national averages; Kendall County levels trend above-average.

MODERATE DEBT: Fitch expects the city's debt burden to remain moderate in the near term based on manageable issuance plans and a moderate amortization rate. Carrying costs, including debt service, pension and other post-employment (OPEB) contributions place a manageable burden on the governmental budget.

RATING SENSITIVITIES
ECONOMIC DIVERSIFICATION; FINANCIAL STABILITY: Continued economic expansion and diversification, with ongoing financial stability would position the city for an upgrade.

CREDIT PROFILE
Boerne is located 30 miles west of San Antonio with a population of about 13,200.

CITY BENEFITS FROM PROXIMITY TO SAN ANTONIO
Steady population growth spilling over from San Antonio has spawned a variety of residential development projects in Boerne over the past decade. While build-out stalled during the recession, the city reports new residential and business development and expansion, continuing to diversify the local economy historically anchored in tourism, agribusiness, and manufacturing.

Boerne is the commercial hub of Kendall County; the county's income and wealth levels trend 30% to 40% above national averages. The city reports about 30% of its population commutes east to take advantage of the broad San Antonio employment base. This is reflected in the county's low unemployment rate of 3.2% as of March 2015.

EXPANDING TAX BASE
The city's taxable assessed valuation (TAV) grew at a solid average annual pace of 5.8% over the past five years. Residential properties comprise 60% of the tax base, followed by commercial and industrial properties at 30%. Fiscal 2016 market value per capita is an above average \\$136,000.

Significant city, county and Texas Department of Transportation (TXDOT) public infrastructure investments position Boerne for continued growth. Management anticipates TAV to increase at moderate rates in the next several years which Fitch considers likely given the number of residential and commercial developments underway.

GROWTH SUPPORTS STABLE FINANCES
Solid historic financial performance is evidenced by general fund reserves in the 40% to 65% of spending range and enabled by sound management practices and policies. These include formal long-range planning and a minimum reserve policy equal to 25% of spending.

Financial performance is consistently favorable to budget and includes moderate pay-as-you-go capital spending. The city completed fiscal 2014 with unrestricted reserves equal to \\$5.6 million, a strong 44.9% of spending.

Sales tax revenues contribute 42% to general fund revenues, followed by non-tax sources (40%) and ad valorem tax revenues (15%). Although generally exposed to above-average volatility, the city's sales tax revenues have grown steadily over the past 10 years by 6.85% on average with just one modest dip, in contrast to sharp swings typically seen in municipal sales tax trends during economic cycles.

Management projects to complete fiscal 2015 with modest growth in unrestricted reserves driven by continued revenue strength and cost controls. The balanced fiscal 2016 budget includes moderate growth, which Fitch considers reasonable in relation to recent trends.

MODERATE DEBT BURDEN

Fitch expects the city's debt burden, 4.4% of fiscal 2016 market value, to remain moderate in the medium term based on manageable new issuance plans. The city anticipates potential road improvement needs of up to \\$4.4 million in the next several years, roughly equivalent to the amount of debt currently scheduled to amortize during the same period.

Fiscal 2014 carrying costs are elevated at 28.7% of spending. Fitch believes carrying costs are manageable given the city's expenditure flexibility through the annual budgeting process and lack of collective bargaining. Additionally, the city's tax rate is relatively low at \\$.472 per \\$100 of TAV in relation to the statutory tax rate limit of \\$2.50.

Boerne participates in the Texas Municipal Retirement System. The plan's 2014 funded ratio is 66.6% based on a 7% investment rate assumption. The plan's unfunded actuarial accrued liability (UAAL) is modest at less than 1% of market value. The city also offers a defined benefit retiree health plan with an UAAL of less than 1/2 of 1% of market value. The city's OPEB obligation is de minimus in relation to market value.