OREANDA-NEWS. Fitch Ratings affirms the following rating for Avery Ranch Road District No. 1, Texas (the district):

--\\$3.3 million unlimited tax refunding bonds (ULTs), series 2007 at 'AA-'.

The Rating Outlook is Stable.

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

KEY RATING DRIVERS

LIMITED OPERATIONS RISK: The district has a limited geographic area and financial resources, though this risk is tempered by the financial oversight provided by Williamson County (ULTs and limited tax bonds rated 'AAA', Stable Outlook by Fitch), and the district's single-purpose that excludes any operating responsibilities.

SOLID RESERVES: The district's solid reserves are important to the rating, as the property tax is sized to provide less than 1x coverage of debt service. The district plans to draw on reserves until they reach a more moderate level of approximately 30% of maximum annual debt service (MADS).

MODERATE TAX BASE GROWTH: The district's tax base is primarily residential and nearing full build-out. Taxable assessed valuation (TAV) trends since the recession reflect steady growth, contributing to a declining tax rate. The district's ability to levy an unlimited tax for debt service provides flexibility in the event recent positive TAV trends reverse.

STRONG REGIONAL ECONOMY: Economic indicators for the city of Austin, in which the district is located, indicate a diverse, vibrant service area with unemployment levels that remain below state and national levels. Income and wealth metrics are above the state and nation. Educational attainment levels equal or exceed those of the U.S.

MANAGEABLE LONG-TERM LIABILITIES: Overall debt levels are high, mainly due to overlapping debt. The district's own debt is rapidly retired and no further borrowing is planned. The district has no pension or other post-employment benefit exposure.

RATING SENSITIVITIES

TAX BASE/REVENUE DETERIORATION: A trend resulting in material deterioration of the district's TAV and/or tax collections could signal a fundamental shift in its credit profile, leading to negative rating action.

MAINTENANCE OF RESERVES: Declines in reserve levels beyond those presently anticipated could place negative pressure on the rating.

CREDIT PROFILE
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 a 1,547-acre golf course community known as Avery Ranch. The district is located approximately 20 miles north of downtown Austin.

MATURE DEVELOPMENT

Avery Ranch is a successful development approaching full build-out (currently estimated at about 99% developed) with approximately 3,600 homes, fully developed commercial property, and some mixed retail.

The district's tax base grew dramatically from 2003 through 2009 as development occurred fairly rapidly. Recent TAV performance has rebounded after a cumulative, modest 2.4% recessionary decline in fiscals 2010-2011. Average annual TAV growth for the last three years has been solid at 3.7%. Management projects a TAV gain of about 7.2% in fiscal 2016 that would increase the district's valuation to roughly \\$1.3 billion. Taxpayer concentration is minimal with the 10 largest accounting for 4.6% of TAV.

DEBT REPAYMENT SOLE FUNCTION OF DISTRICT

The district's sole responsibility is the servicing of debt. The district is not authorized to levy an O&M tax, the district does not have any 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 service levy is billed along with county property taxes on a single bill.

The tax rate necessary to meet the district's debt service obligations has been sharply reduced over time given the fairly steady TAV growth since the district's inception. Management anticipates the fiscal 2016 debt service tax rate will again be reduced to just under \\$0.10 per \\$100 TAV, which is almost a third of the 27.5 cents per \\$100 TAV levied in fiscal 2006. Moderate reduction of debt service fund balance has also been utilized to further reduce the tax rate.

The district's debt service fund balance totaled \\$570,000 at fiscal 2014 year-end, equivalent to 54% of MADS. Management anticipates use of debt service reserves in the amount of \\$50,000 for fiscal 2016 unless TAV growth trends reverse. Debt service fund balance is subsequently expected to be maintained at a reduced but adequate level with a floor of \\$300,000 or about 30% of MADS.

OVERALL DEBT HIGH; OTHER LONG-TERM LIABILITIES MINIMAL

The overall debt burden is high due largely to the debt loads of overlapping entities (primarily Leander Independent School District and Williamson County) and is approximately 7.8% of full market value. Debt service for the district's direct debt is level at \\$1 million annually and principal is repaid rapidly with 100% retired within 10 years. Other long-term liabilities such as pension obligations do not exist. The district has no remaining bond authorization.

AUSTIN METRO AREA CONTINUES SOLID GROWTH

The MSA area, Austin-Round Rock, continues to be among the top-performing U.S. metro area economies. The MSA economy historically has been buffered by the large and stabilizing presence of state government as well as seven colleges and universities, including the University of Texas, one of the largest public universities in the country. High-technology manufacturing is also a major employer, attracted to the area by a well-educated workforce and the availability of major research facilities.

Year-over-year unemployment trends reflect further economic improvement as unemployment levels have continued to fall despite a 3% labor force gain. Unemployment in the MSA declined to 3.0% in May 2015, which was down from 4.1% in May 2014 and below the state and U.S rates of 4.3% and 5.3% respectively. Income and wealth levels as measured by per capita money income are roughly 15% above the state and U.S.