OREANDA-NEWS. Fitch Ratings has affirmed the 'BBB+' rating on the following bonds of Cordillera Metropolitan District, Colorado:

--\$5.1 million unlimited tax bonds, series 2003 and 2006A.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the consolidated Cordillera Metropolitan District (the district), payable from an unlimited ad valorem tax levied on all taxable property within the district.

KEY RATING DRIVERS

RELIANCE ON CONTRACTUAL PAYMENTS: Contributions from the Cordillera Property Owners Association (CPOA) provide the district with significant operating and financial support. The long-term trend for these revenues and district property taxes hinges on the viability of the district's key asset, the Club at Cordillera (a golf and recreational facility), which has fueled the overall desirability of the community.

DECLINE IN ASSESSED VALUATION (AV): The district's tax base consists primarily of high-end second homes located within the Greater Vail Valley. Values dropped significantly in recent years erasing gains posted during the housing bubble. Officials estimate modest growth in the fiscal 2016 reassessment given recent sales trends.

STABLE FINANCIAL OPERATIONS: District financial operations are characterized by nominally small but adequate reserves and liquidity. The district's operating mill rate is competitive with neighboring communities, and may be adjusted to generate a revenue-neutral levy.

MANAGEABLE DEBT PROFILE: Debt ratios are moderately low, no additional debt is expected, and existing obligations are repaid very rapidly.

RATING SENSITIVITIES

STABLE CLUB PERFORMANCE: The rating is sensitive to changes in operating performance of the Club at Cordillera, due to the high level of economic and revenue concentration the club represents. This concentration level makes positive rating action unlikely.

CREDIT PROFILE
The district is an affluent residential golf community located in the Greater Vail Valley 20 miles from the Vail/Eagle County regional airport. Formed in 1993, Cordillera experienced relatively rapid development during the 1990s and 2000s as wealthy second-home buyers were attracted by the district's high-quality amenities and proximity to the Vail and Beaver Creek resorts. The district is very small and comprises mostly second-home owners. There are 900 pad sites, of which 567 or 63% are currently built out. Recent development activity has been slow.

GOLF CLUB MEMBERSHIP AND CPOA FUNDING RESTORED
The Club at Cordillera is the community's primary amenity and selling point, and consists of three signature golf courses, a tennis center and fitness facility, and one outdoor pool. Following the settlement of litigation over financial troubles and membership contracts that led to a Chapter 11 bankruptcy, the club was sold to new owners in December 2012 who appointed an experienced golf course manager (Troon Golf). The new owner and operator have reopened the club's facilities and rebuilt membership to essentially the level prior to bankruptcy.

Following settlement of the litigation, CPOA funding in fiscal 2013 returned to prior levels. The fiscal 2015 budget projects combined contributions of \$1.6 million for operations and debt service, an increase of 149% over 2012.

SHARP DECLINE IN AV
The district experienced a precipitous drop in area home values, as reflected in 33% and 16% declines in the district's 2012 and 2014 tax base, respectively (property is revalued biennially). The valuation losses wiped out all of the district's AV gains between 2000 and 2010. Additionally, six homeowners in the Timber Springs area petitioned for exclusion from the district's operating tax base in 2014. The Timber Springs exclusion accounted for a modest portion of the 2014 AV decline, and management indicates no organized opposition that would signal future exclusions. Fitch takes some comfort in the requirement of excluded property owners to pay the district's debt service tax, and the fact that they no longer receive district services.

Revenue risk related to continued tax base declines is somewhat offset by a 2003 voter-approved measure that allows the district to adjust its operating mill rate to generate a similar level of property tax revenues as the year before, plus up to 5.5%. Officials estimate modestly positive reappraisals in the next reassessment cycle (fiscal 2016), which Fitch views as reasonable given upward trends in home sales and prices. Zillow reports an average list price of \$1.7 million at January 2015, a 55% increase over 2012.

HISTORICALLY STABLE FINANCIAL PROFILE
District financial operations are limited, with an annual general fund budget of approximately \$5 million. The fiscal 2013 unrestricted general fund balance was equal to \$1.4 million or a sound 31% of spending, with liquidity sufficient to cover over four months of operating costs. Unaudited results for fiscal 2014 point to a similar level of reserves.

Approximately 70% of general fund revenues are derived from property taxes. Property tax revenues for fiscals 2013 and 2014 were on budget and similar to prior years. An additional 26% of general fund revenue is received from district service charges, mostly composed of payments to the district from the CPOA for administrative services.

Due to the flat property valuation for fiscal 2015, management increased the district's property tax millage rate for operations, sufficient to raise general fund tax revenue by 5.5%, or approximately \$176,000. The fiscal 2015 budget also reflects an 18% increase in CPOA funding and an \$895,000 transfer (18% of spending) to fund one-time capital outlays. Fitch expects the district to maintain its adequate financial position in 2015.

MANAGEABLE DEBT BURDEN WITH NO POST-EMPLOYMENT LIABILITIES
Overall debt is moderately low, especially when compared with the district's wealthy tax base, as indicated by overall debt-to-full value of 2.9%. Debt service costs are very high at 39% of total government spending, though this is not unusual for limited-purpose entities.

Bonds amortize rapidly with 100% of principal retired within eight years. In 2010, district voters approved a \$15 million bond authorization to be used solely as a last resort to purchase the assets of the golf club. The district has no plans to issue this additional debt.

The district has no long-term liabilities related to its employees, as the district participates in a defined contribution pension plan and does not provide retiree health care benefits.