OREANDA-NEWS. Fitch Ratings has affirmed the 'AA-' rating on the following Aransas County Navigation District No. 1, TX (the district) bonds:

--\$4.7 million unlimited tax bonds, series 2007.

The Rating Outlook is Stable.

SECURITY

The bonds are payable from an unlimited property tax levy within the district.

KEY RATING DRIVERS

LARGE OPERATING MARGINS: The district's financial profile remains positive, characterized by large annual operating margins which have resulted in considerable fund balances and ample liquidity.

TAX BASE RECOVERY: Taxable assessed value (TAV) has returned to pre-recession levels as a result of renewed construction of waterfront and vacation homes after a period of modest contraction. Prospects for continued growth are positive given the area's popularity for recreational fishing, sailing, and bird-watching.

MODERATE DEBT LEVELS: The district's limited capital needs will be funded with current resources, preserving its moderate overall debt position and average principal pay-out rate.

RISKS OF COASTAL ECONOMY: The local economy is subject to some cyclicality with economic dependency on tourism as well as coastal vulnerability to storm/hurricane disasters.

RATING SENSITIVITIES

DEPLETION OF LARGE RESERVES: The maintenance of large financial reserves remains key to credit quality to mitigate the potential for weather-related damages to the district's principal assets.

CREDIT PROFILE

The boundaries of the district are primarily coterminous with Aransas County (general obligation bonds rated 'AA-' by Fitch), located on the Gulf Coast approximately 30 miles northeast of the city of Corpus Christi. The district oversees three local harbors: Cove Harbor, Fulton Harbor, and Rockport Harbor. The Rockport Harbor supports much of the area's recreational activities.

TAX BASE RECOVERY

Aransas County's present population of just under 25,000 represents an increase of roughly 10% since the 2000 census. The county's TAV returned to pre-recession levels in 2014 after a brief period of contraction. The fiscal 2014 tax base reached almost \$3 billion, growing about 4% from the previous year, exactly offsetting the cumulative loss that occurred in fiscals 2011 and 2012. Market value per capita remains high at \$140,000.

The county unemployment rate declined over the past 12 months to a low 4.8% in November 2014 due to growth in employment and a stable labor force environment, compared to the state (4.6%) and national (5.5%) rates. The area's appeal to fishermen, beachgoers, and birdwatchers has encouraged ongoing development of the tourism industry.

LARGE ANNUAL OPERATING MARGINS BENEFIT LIQUIDITY

District operations are supported by property taxes and harbor rentals. Financial performance remains solid as board members have consistently adopted operations and maintenance (O&M) tax rates equal to the effective rate of the prior year, thereby preserving baseline revenues. With a 2015 O&M rate of \$0.037 per \$100 TAV, ample taxing margin remains below the \$0.10 per \$100 TAV cap for Texas districts. The unlimited debt service rate is a low \$0.0163 per \$100 TAV.

The district produced fiscal 2013 net revenues before capital contributions of \$1.5 million, resulting in a large operating margin of 45%. Furthermore, its liquidity position is solid, with unrestricted cash and investments equal to almost four years of operating expenses. District management projects another operating surplus will be recorded for fiscal 2014, which Fitch views as reasonable given the district's history of conservative budgeting. The fiscal 2015 budget is funded at the effective O&M tax rate and projects a modest increase in net assets. Fitch has noted that completion of the district's audits has been late by three to five months in recent years.

MODERATE OVERALL DEBT LEVELS

Overall debt ratios for the district are considered moderate by Fitch at \$3,568 per capita and 2.9% of market value. Principal payout is above average with 63% repaid within 10 years. The series 2007 bonds are the district's only debt obligation. Voters approved these bonds for building and repairs of Rockport Harbor's bulkheads and breakwater structures. All projects were complete by July 2012.

LIMITED DEBT PLANS; WELL-FUNDED PENSION

The district currently has no plans for additional GO debt, planning instead to finance its modest future capital needs on a pay-go basis. Using Fitch's 7% rate of return on investment assumption, the district's pension was well funded at 79.3% as of Dec. 31, 2012. Debt service as a percentage of total operating revenues is slightly high at 15%, yet not of concern given the district's status as a single-purpose entity and minimal future capital needs.