Fitch Rates Mansfield, Texas Drainage Rev Bds 'A+', Upgrades Outstanding Debt.

AUSTIN, Texas -- Fitch assigns an 'A+' rating to the City of Mansfield, Texas' (the city) $2.2 million municipal drainage utility system revenue bonds, series 2007. The bonds are scheduled to sell the week of Dec. 11 via a negotiated sale managed by SWS Securities. In addition, Fitch upgrades to 'A+' from 'A-' the rating on the city's $4.7 million in drainage utility system revenue bonds outstanding. The Rating Outlook is Stable.

The bonds are payable from and secured by a first lien on and pledge of drainage system revenues. Bond proceeds will be used to finance the construction of various improvements to the drainage system and to pay issuance costs.

The upgrade to 'A+' from 'A-' is due to an established pattern of revenue generation, producing healthy reserve levels and solid debt service coverage. Other credit strengths include a gross pledge of drainage fee revenues (collected as part of water and wastewater bills), a manageable capital plan, and the city's conservative budgeting and planning practices. Fitch also has factored into the rating merely adequate rate covenants, as well as the prospect of additional fee increases and further leveraging of this revenue source.

The city increased drainage fees in June 2003 upon completion of a facility needs study that identified $18 million-$19 million in drainage capital projects over a 20-year period. Residential customers now pay $3.50 per month, while commercial, industrial and other customers are charged on a per-acre basis. The fees are included on monthly water/wastewater bills, and nonpayment of the fee will result ultimately in termination of water service. Despite the sharp fee increase in 2003, the city reports a less than 1% delinquency rate with its water/wastewater utility customers.

Financial operations in the drainage fund have improved markedly since fiscal 2003; while earlier period results featured periodic operating shortfalls and limited reserves, the fund now boasts healthy reserve levels and debt service coverage. Cash and investments at the end of fiscal 2005 totaled more than $330,000, and the fund reported net operating income of roughly $450,000. Gross revenues produced annual debt service coverage in fiscal 2005 of 2.3 times (x). Preliminary fiscal 2006 results comparable results. Non-debt related system expenses consist of administrative outlays and maintenance of drainage facilities.

Projects included in the capital plan consist of a wide range of channel, detention pond and culvert improvements. Proceeds from the initial debt offering in 2003 financed storm drain and channel improvements, as well as culverts and facility design costs; the series 2007 proceeds will finance construction of a detention basin and the purchase of land for another basin. Debt retirement is slightly below average, with roughly 40% of principal retired in 10 years.

Located primarily in southeastern Tarrant County, the city's estimated 2006 population of more than 54,000 represents an increase of nearly 100% from the 2000 census, and city officials anticipate that its population will reach 70,000 in 2010. The city's rapidly growing economy is marked primarily by continuing expansion of its retail sector and substantial residential construction, both benefits of the ongoing expansion of the Dallas-Fort Worth metroplex. Mansfield also has a significant and diverse manufacturing base that produces goods ranging from electronics to food products. Recent monthly unemployment statistics for the city are comfortably below regional, state and national averages.

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