OREANDA-NEWS. Fitch Ratings assigns a 'AAA' rating to the following obligations of the town of Flower Mound, Texas (the Town):

--\$3.1 million certificates of obligation (COs) series 2015.

The COs are expected to price via competition on April 8, pending market conditions. Proceeds from the COs will be used for park facility, streets, drainage, water and sewer improvements.

In addition, Fitch affirms the 'AAA' rating for the town's \$119.3 million in outstanding limited tax obligations - GOs and certificates of obligation (COs).

The Rating Outlook is Stable.

SECURITY

The GOs and COs are payable from an ad valorem tax levied on all taxable property within the town, limited to \$2.50 per \$100 taxable assessed valuation (TAV). The COs are additionally secured by a nominal pledge of subordinate net revenues (limited in amount typically to \$1,000) from the town's water and wastewater system.

KEY RATING DRIVERS

CONSISTENT FINANCIAL PERFORMANCE: The town's consistent financial performance has contributed to healthy reserves in excess of its policy target. Dedicated funding sources, including citizen-approved sales taxes provide additional funding for general government needs and contribute to a relatively low ad valorem tax rate.

STRATEGIC LOCATION; STRONG DEMOGRAPHICS: The town lies on Grapevine Lake and is strategically located within close proximity to the Dallas-Fort Worth (DFW) airport. Low unemployment reflects access to the DFW job market and an expanding local employment base. Income, wealth, and education attainment levels are high.

SOUND TAX BASE GROWTH: The largely residential tax base performed well during the recession. Accelerated growth over the recent past reflects a pick-up in new commercial/industrial, as well as residential development and a rise in home prices. Fitch anticipates these trends to continue based on current and planned activity levels.

MODERATE DEBT PROFILE: A slightly elevated overall debt burden results from overlapping debt of local school districts. The town's carrying costs, annual debt service, pension and other post-employment contributions (OPEB), are moderate and incorporate a rapid amortization rate. New debt plans are modest. Pensions are well-funded.

RATING SENSITIVITIES

SOLID CREDIT PROFILE: The rating is sensitive to shifts in fundamental credit characteristics including the town's ongoing strong financial management and sound reserves. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.

CREDIT PROFILE

The town of Flower Mound, population of about 68,600, is located 28 miles northwest of downtown Dallas and within three miles of the DFW airport.

STABLE LOCAL ECONOMY WITH GROWTH PROSPECTS

Flower Mound has transitioned from a bedroom community to an increasingly diverse economy, benefitting from its proximity to the DFW metroplex and airport. The tax base is comprised primarily of high-end residential (70%) and commercial and industrial properties (13%) and is without concentration. Median household income represents 228% and per capita money income 162% of the U.S. averages respectively. Levels of educational attainment are also significantly higher than the U.S. average, positioning the town for ongoing growth and prosperity.

Taxable assessed value (TAV) has grown by a sound 3% on average over the past decade, but realized a gain of 4.6% in fiscal 2014 and 8.5% in fiscal 2015 fueled by accelerated development and rising property values. Fitch anticipates sound near term growth based on development underway. Fiscal 2015 market value per capita is a high \$130,000.

The town's unemployment rate as of Jan. 2015 is a low 3.7%, reflecting access to the broad regional job market and an increasing local employment base. Large employers include governmental, school district, medical sector, manufacturing and retail concerns.

CONSISTENT PERFORMANCE BUILDS HEALTHY RESERVES

The town's diverse general fund revenue stream consists of property taxes (48% of total revenues), sales taxes (18%), franchise and other taxes (14%), charges for services and fees. Other dedicated funding sources such as a 1/4 of 1% economic development additional sales tax and a 1/4 of 1% additional sales tax for street maintenance mitigate operating and capital pressure on the general and debt service funds; the low \$.44 per \$100 of TAV ad valorem tax rate is well below the \$2.50 limit.

Long-term planning and cost monitoring help the town to maintain a strong financial position, evidenced by healthy reserves in excess of policy targets. The town's fund balance policy targets a minimum 15% of general fund budgeted operating expenditures, although favorable performance has contributed to unrestricted reserves in the range of 23% to 32% over the past several years.

A healthy fiscal 2014 unrestricted general fund balance of \$15.9 million (34.2% of spending) reflects a consistent trend of strong revenue growth. Officials report fiscal 2015 fiscal year to date performance favorable to the structurally balanced budget. The fiscal 2015 budget and five year plan include conservative assumptions and solid reserves in excess of policy targets.

MODERATE DEBT PROFILE AND WELL-FUNDED PENSIONS

Overall debt is somewhat elevated at 5.6% of market value. At 12.7% of governmental spending, the debt service burden on the budget is also modestly elevated due to a rapid rate amortization of 75% within 10 years.

The town's fiscal 2014 general government five-year capital plan is manageable at about \$135 million. Capital plan funding sources include dedicated sales taxes, impact fees, developer agreements, tax increment reinvestment zone (TIRZ) monies, and grants. The plan includes only \$23 million of new debt issuance, compared to \$53 million in debt retirements during the same period.

The town's pension plan, as well as disability and death benefits, is administered through the Texas Municipal Retirement System. The town's funded position is strong at 90.2% as of Dec. 31, 2013, reflecting the town's assumed 7% rate of return. Carrying costs including debt service, pension and OPEB contributions represent a moderate 16.7% of governmental fund spending.