OREANDA-NEWS. Fitch Ratings affirms the ratings on the following Princeton, Texas obligations:

--\\$800,000 series 2007 general obligation (GO) refunding bonds at 'A-';
--\\$7.2 million series 2007 combination tax and surplus revenue certificates of obligation (COs) at 'A-'.

The Rating Outlook is revised to Positive from Stable.

SECURITY
The bonds and COs are direct obligations of the city payable from ad valorem taxes limited to \\$2.50 per \\$100 of taxable assessed valuation (TAV). The COs also carry a pledge of surplus net revenues of the city's water and sewer system.

KEY RATING DRIVERS

IMPROVING FINANCES: The Positive Outlook reflects improved finances, as evidenced by restoration of reserve adequacy. Fiscal 2014 is the third consecutive year of surplus results following several years of deficits. The city anticipates further strengthening of reserves in the near term, which Fitch considers reasonable based on revenue trends.

SOUND ECONOMY, GROWTH PROSPECTS: The Outlook revision also recognizes an expanding local economy benefiting from transportation improvements, and favorable prospects for the greater Dallas Fort Worth (DFW) economy within which the city resides.

MANAGEABLE DEBT PROFILE: High overall debt reflects historically rapid growth needs of the local school district. The city's carrying costs (debt service and pension contributions) are moderate with a stable trajectory. Its pension plan is well funded, and the city has no other post-employment benefit obligations.

RATING SENSITIVITIES

SOUND FINANCES; AFFORDABLE DEBT: Continued progress in the city's restoration of reserves, as well as maintenance of affordable carrying costs, will likely lead to positive rating action.

CREDIT PROFILE
Princeton is located approximately 30 miles north of downtown Dallas with an estimated 2015 population of 10,413.

GROWING BEDROOM COMMUNITY

Princeton's population has doubled since the 2000 census as the residential construction boom moved north from Dallas into Collin County. The city's population grew by an annual average of 7.8% over the past six years, with many residents commuting to Dallas and nearby communities for employment.

Residential properties comprise two-thirds of the city's tax base. A healthy regional housing market and new development increased fiscal 2015 taxable assessed valuation (TAV) 13.4% and a stronger 28.1% in fiscal 2016 to \\$409.3 million. Fiscal 2016 market value per capita remains below average for the city's rating category at \\$49,000.

Fitch expects further near-term growth in the tax base due to residential and commercial development underway. Future growth prospects are positive, reflecting the city's affordable and available land with easy access to nearby McKinney and Dallas.

IMPROVING FINANCIAL PROFILE

The city reversed a trend of growth-related deficits in fiscal 2012, and continues to benefit from revenue growth and cost controls. The city's third consecutive surplus in fiscal 2014 improved unrestricted operating reserves to 20.5% of spending, although the dollar amount remained relatively modest at \\$622,000.

Officials expect to add to reserves again in fiscal 2015 based on strong sales tax revenue and TAV growth, marking further progress toward the city's reserve target of 25% of expenditures. Fitch considers this goal attainable given ongoing and planned economic development.

HIGH DEBT, MODERATE CARRYING COSTS

Overall debt is elevated at 10.4% of market value, attributable largely to debt of the local school district. The impact of debt on the city's budget is manageable as measured by carrying costs, which equaled 18.3% of fiscal 2014 governmental expenditures. Princeton's water and wastewater utility supports about one-half of the city's annual GO debt service.

GO principal amortization is slightly below average at 44% within 10 years, and the city's near term debt issuance plans are modest.

The city's pension plan is provided through the Texas Municipal Retirement System, an agent multiple employer public employee retirement system. The city's plan had a strong fiscal 2014 funded position of 89.7%, based on the TMRS investment rate assumption of 7%. The city does not offer post-employment health benefits.