OREANDA-NEWS. Fitch Ratings has assigned an 'AA+' rating to the Fort Worth, Texas \\$128.4 million (est.) general purpose refunding and improvement bonds, series 2015A.

The bonds are scheduled for a competitive sale on July 28. Proceeds will finance various public improvements and refund a portion of the city's outstanding tax-supported debt for interest savings.

In addition, Fitch affirms the following ratings:

--\\$504.6 million outstanding Fitch-rated general purpose bonds and certificates of obligation (COs; pre-refunding) at 'AA+';

The Rating Outlook is Stable.

SECURITY
General purpose bonds and COs are payable from a limited ad valorem tax levied against all taxable property in the city. COs are secured further by a limited pledge of surplus city revenues from specific operations.

KEY RATING DRIVERS
REGIONAL ECONOMY GROWING: Fort Worth is a major anchor in the Dallas-Fort Worth regional economy with a population of roughly 6.8 million. The city has registered solid gains recently in employment, tax base and sales tax revenues in conjunction with overall regional economic gains.

SATISFACTORY FINANCIAL PROFILE: Financial operations remain satisfactory, as strengthening revenues have managed to keep a chronic budget imbalance at manageable levels. Operating reserves declined sharply at fiscal 2014 year-end due to a reclassification of risk activity, but remain adequate.

MODERATE DEBT LOAD: The city has a manageable overall bonded debt burden, and payout of tax-supported debt is rapid. Total carrying costs are somewhat elevated.

PENSION CHALLENGES: Pension funding levels have declined recently to weak levels, due partly to program assumption and benefit adjustments. Police and fire pension benefit changes have been challenged in court by program participants.

RATING SENSITIVITIES
RESOLUTION OF STRUCTURAL BUDGET GAP: Management's inability to close the ongoing, albeit manageable budget gap over the next one to two years likely will result in negative rating action.

PENSION FUNDING: Recent changes to the city's pension plan for non-uniformed and public safety employees should improve funding levels over time. Successful resolution of current legal challenges to certain aspects of the program revisions will be another important credit consideration going forward.

CREDIT PROFILE

SATISFACTORY FINANCES

The city's financial performance the past several years has been marked by an imbalance between recurring revenues and expenses. Management successfully closed the gaps through fiscal 2012, resulting in a boost to operating reserves. Fiscal 2013 general fund results included a moderate \\$7.1 million net operating deficit after transfers, and unrestricted general fund reserves remained healthy at \\$140.6 million or nearly 25% of spending.

The general fund recorded a \\$75.3 million net operating deficit after transfers in fiscal 2014, most of which was due to an accounting change. The city reclassified risk activities (risk management, workers compensation insurance, group health insurance, and unemployment compensation) from the general fund to internal service funds and transferred \\$64 million for the beginning balances of these new funds. The city also made an \\$8.8 million transfer to eliminate a deficit in the golf fund. Less than \\$5 million of the net operating deficit related to general fund operations.

The unrestricted general fund balance at fiscal 2014 year-end was \\$77.8 million or 12% of spending and transfers out. While sharply lower than prior years, the balance exceeds the city's 10% unassigned fund balance policy minimum and is adequate given the city's diverse operating revenue stream. The current projection for fiscal 2015 includes another \\$9.4 million net operating deficit in the general fund, as gains in sales tax and other revenues are not projected to be enough to close the spending gap for the year. Spending pressure is led by fire and police pay hikes that are part of recently renewed contracts. Public safety accounts for more than half of general fund spending.

Management has expressed its commitment to regain structural budgetary balance in fiscal 2016. Fitch will continue to monitor the progress in addressing the imbalance, and an inability to achieve this objective over the next one to two years likely will result in negative rating action.

MANAGEABLE DEBT BURDEN, PENSION CHALLENGES

The city's overall bonded debt burden is moderate. Principal amortization is rapid, with two-thirds of tax supported debt retired within 10 years. The current offering will finance various infrastructure improvements and refund a portion of the city's outstanding tax-supported debt for interest savings. The new money portion of this sale is the first installment from a \\$292 million 2014 bond authorization that was overwhelmingly approved by voters.

The city maintains a single employer defined benefit retirement system that covers all regular full-time employees of the city. As of Jan. 1, 2014, the funded ratio was approximately 64% and the unfunded actuarial accrued liability was \\$1.1 billion, or roughly 2% of fiscal 2015 market value. Using a more conservative 7% return assumption, the estimated funding ratio is a weaker 58%.

Since 2011, the city has made a number of adjustments to civil and public safety retiree benefits, affecting primarily employees hired after July 1, 2011. These changes, including increasing the retirement age, removing overtime from the compensation base and eliminating COLAs, should improve funding levels over time. The city also revised the program's investment return assumption from 8.5% to 8%, which boosted the liability total.

Participants in both the police and firefighter plans have sued the city over benefit changes to existing employees. The trial judge ruled in favor of the city in the police case, and the plaintiffs have appealed the ruling; no ruling has been made in the firefighter case. Fitch will continue to monitor the city's progress in its efforts to shore up pension funding levels.

The city also offers other post-employment benefits (OPEB) for employees hired before Jan. 1, 2009, and the unfunded liability as of Jan. 1, 2014 was sizable at \\$903 million or 1.6% of fiscal 2015 market value. The city has established an OPEB trust and makes periodic contributions; the current balance is \\$66 million. Total carrying costs (debt payments, plus combined pension required contribution and OPEB payment of \\$121.7 million) were slightly elevated at 22.6% of governmental spending in fiscal 2014.

POPULATION AND ECONOMY CONTINUE EXPANSION

With an estimated 2014 population of about 793,000, Fort Worth's population continues to grow (up more than 3% annually since 2000). In addition, the city's extra-territorial jurisdiction is sizable and provides opportunity for future annexation and growth.

The metropolitan area employment base is extensive, and while military-related spending still accounts for a significant part of the economy, recent gains in other sectors, such as services, construction, and trade have diversified the labor force. In addition, ranching, manufacturing, technology, education, and aerospace are significant components of the Fort Worth economy and serve to diversify economic activity. Management reports a number of commercial, residential and industrial projects either underway or planned in the city.

The emergence from bankruptcy by AMR Corporation (parent of American Airlines), its merger with US Airways and the decision to locate the headquarters of the combined airline in Fort Worth were a boost to the local economy. AMR employs more than 20,000 workers in the area and is the city's largest employer. The defense sector concentration in the local economy has exposed employers to periodic federal spending cutbacks, and Bell Helicopter has laid off more than 600 workers at its Fort Worth plant since October 2014; the company employs roughly 4,750 locally.

The city continues to add to employment totals as the regional economy expands. In March 2015, the city's employment total was nearly 374,000 and the unemployment stood at 4.1%, down from 5.2% a year ago and well below the national average of 5.6% for the month. City wealth levels generally are below the region and state; however, housing prices remain relatively low in comparison to other large cities in the state, pointing to a lower cost of living. Market value per capita is average at \\$70,000. Taxable values have registered gains the past four years and the fiscal 2015 taxable valuation totals \\$47.1 billion. Building permit totals also increased each of the past two years.