OREANDA-NEWS. May 23, 2016. Fitch Ratings has assigned an 'AA+' rating to the following bonds of Avery Ranch Road District No. 1, Texas:

--\\$2.9 million unlimited tax (ULT) refunding bonds, series 2016.

The bonds are scheduled for negotiated sale May 24. Proceeds will be used to refund a portion of the district's outstanding ULT bonds for debt service savings.

Fitch has also upgraded the rating on \\$3.3 million in ULT refunding bonds, series 2007 to 'AA+' from 'AA-'.

The Rating Outlook is Stable.

The bonds are payable from an unlimited ad valorem tax levied against all taxable property within the district.


The rating upgrade to 'AA+' reflects the application of Fitch's revised criteria for U.S. state and local government credits, which was released April 18, 2016 and provide for a more focused consideration of an issuer's economic base. Fitch treats these ULT bonds as dedicated tax bonds, as the district does not have the operating risk typical of most local governments.

Economic Resource Base
The district is located in northwest Austin in Williamson County, and encompasses a 1,800-acre residential and golf course development known as Avery Ranch. The tax base is small with approximately 3,600 homes, fully developed commercial property, and some mixed retail. The robust Austin economy is characterized by low unemployment, above-average wealth metrics, and high educational attainment.

Dedicated Revenue Stream
The district's revenue base is narrow but growth prospects are solid based on regional reappraisal trends. The district's debt service tax rate is unlimited.

Lack of Operating Risk
The district has no operating responsibilities. Financial oversight is provided by Williamson County (Fitch Issuer Default Rating [IDR] of 'AAA' with a Stable Outlook).

Long-Term Liability Burden
The district's long-term liability burden is moderately low and the district plans to issue no additional debt.

Tax Base/Revenue Deterioration: A trend of material deterioration of the district's taxable assessed valuation (TAV) and/or tax collections could signal a fundamental shift in the credit profile and lead to negative rating action.


The district was created by Williamson County in 2001 for the purpose of reimbursing developers for the cost of constructing a four-lane divided road that provides accessibility to other major thoroughfares through Avery Ranch. The development is fully built out. Residents access the large employment base of the Austin-Round Rock metropolitan statistical area, including government, higher education, high-technology manufacturing, and healthcare.

Dedicated Revenue Stream
The district's only revenue source is a property tax for debt service; the district is not authorized to levy a tax for operations. Therefore, Fitch uses TAV as a proxy for revenue growth in this assessment. District tax collections are historically strong at over 99% of the annual levy. The tax rate necessary to meet debt service obligations has been sharply reduced over time given the fairly steady TAV growth since the district's inception. Management plans to levy a tax just below the rate required for sum-sufficient debt service each year, drawing down debt service reserves until district debt matures in 2025. However, the debt service tax is unlimited as to rate or amount.

The tax base exhibited growth over the past 10 years that far outpaced U.S. GDP, at an average annual rate of 19.5%. Annual increases have slowed with the maturity of the Avery Ranch development, but Fitch expects that TAV growth will continue to trend at least in line with the U.S. economy due to expected property value appreciation.

The tax base has no taxpayer concentration, but is small in size with no further development prospects. Fitch believes that the predominantly residential base presents some local housing market risk in the event of an economic downturn, as reflected in Fitch's assessment of 10%-15% home overvaluation in Texas (see 'U.S. RMBS Sustainable Home Price Report' dated Feb. 8, 2016 at 'www.fitchratings.com').

Lack of Operating Risk
The district is governed by the Commissioners Court of Williamson County and has no operating responsibilities. Its sole responsibility is the servicing of outstanding debt. The district has no employees and road maintenance responsibilities lie with the City of Austin, to which title in the road was conveyed following completion in 2003.

The district's debt amortizes very rapidly. Debt service is level through 2022, after which it descends through final maturity in 2025.

Long-Term Liability Burden
The district's long-term liability burden, including its share of debt issued by the county and overlapping school districts, is affordable at 10% of personal income. Fitch expects that this metric will remain fairly stable. The district has no pension or other post-employment benefit obligations.