OREANDA-NEWS. Fitch Ratings assigns an 'AA+' rating to the following Fort Bend County, Texas' (the county) bonds:

--\$50.9 million unlimited tax (ULT) road and refunding bonds, series 2015A;
--\$93.3 million limited tax refunding bonds, series 2015B.

In addition, Fitch affirms the following outstanding ratings at 'AA+':

--\$265.4 million (pre-refunding) ULT road bonds;
--\$176.5 million limited tax bonds (pre-refunding);
--\$155.1 million limited contract tax and subordinate lien toll revenue bonds (issued by Fort Bend Grand Parkway Toll Road Authority).

The bonds are expected to price via negotiation April 13. Bond proceeds will be used for the construction and maintenance of roadways as well as to refund certain maturities for economic savings and to pay issuance costs.

The Rating Outlook is Stable.

SECURITY

The limited tax bonds are payable from a pledge of ad valorem taxes, limited to \$0.80 per \$100 taxable assessed valuation (TAV). The ULT road bonds are payable from a separate, unlimited ad valorem tax pledge. No rating distinction is made between the unlimited and limited tax bonds given the wide taxing margin.

KEY RATING DRIVERS

STRONG FINANCIAL POSITION: The county's prudent fiscal practices are evident in the consistent maintenance of strong financial reserves despite growth-related spending pressures while annually investing a significant portion in pay-as-you-go capital projects. Property taxes comprise over three-fourths of the county's general fund resources, providing a level of stability to the county's financial profile and budgeting efforts.

ABOVE-AVERAGE ECONOMY, DEMOGRAPHIC PROFILE: The county is part of the broad Houston metropolitan statistical area (MSA) economy, which continues to outpace the nation in job and income growth due to a strong energy sector and diversification in other sectors. The county's own economy continues to expand and diversify, although Fitch believes both the local and regional economies remain vulnerable to energy price change. County income and educational attainment metrics are well above those of the MSA, state, and nation.

TAX BASE EXPANSION: Taxable assessed valuation (TAV) performance continues to strengthen after a relatively short period of sluggish to modestly declining TAV over the recession. Fitch believes some further TAV growth is likely in the near-term given development underway or planned. Gains in the county's diverse tax base are due largely to significant residential development in the county, which has been bolstered by the county's continued, active efforts to expand its transportation corridors.

HIGH OVERALL DEBT, OTHER LIABILITIES MANAGEABLE: Overall debt levels are high, reflective of the area's growth-related capital needs. Nonetheless, voters continue to consistently support county management's bond and capital priorities at strong approval rates. Capital needs appear to be manageable and carrying costs are moderate due in part to the below-average pace of principal amortization of the county's direct debt. The pension's funded position is satisfactory.

RATING SENSITIVITIES

SHIFT IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics including conservative fiscal management practices. Significant financial flexibility helps to largely mitigate Fitch's concerns regarding the high debt levels. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely over the near term.

CREDIT PROFILE

Fort Bend County has been one of the fastest growing counties in the state and nation. Currently estimated at nearly 678,000 residents, the county's population has grown at a rapid 5% annual average since 2000. Expansion has been fueled by its location within the growing and diverse Houston metropolitan economy as well as the availability of ample land and housing that continues to further develop the county's own economy and employment base.

PART OF REGIONAL HOUSTON MSA ECONOMY
The county's own economic base has grown significantly within the last decade, bolstered by the county's ongoing, active efforts to expand its roadways. Substantial population gains and residential development have resulted in expanding retail and commercial sectors. The county's unemployment rate of 4.1% in January 2015 is down year-over-year and comfortably below the state (4.6%) and the nation (6.1%) for the same period. This is despite strong 4.5% year-over-year labor force growth. Wealth and educational attainment levels remain notably higher than those for the Houston MSA, state, and nation.

The Houston MSA economy made a robust post-recessionary recovery due in part to the strength of the energy sector. However, Fitch believes the recent plunge in oil prices is likely to dampen the pace of growth over the near term. As it is one of the state's petrochemical centers, lower energy prices may serve as a partial offset to any economic softening (see Fitch press release, 'Oil Price Decline Likely to Have Targeted Effect on Local Texas Economies & Revenues dated Jan. 13, 2015).

FURTHER TAX BASE EXPANSION
The county's tax base has historically realized double-digit annual gains in line with rapid population expansion. Recessionary economic pressures saw TAV turn sluggish to modestly declining, although the full effect of the recession on the county's tax base was relatively mild and short-lived. TAV has steadily strengthened over the three most recent fiscal years (fiscals 2013-2015), primarily due to pent-up housing demand and associated residential development. A strong 9% gain was realized in fiscal 2015, increasing TAV to about \$45.7 billion. The county's tax base is diverse with the top 10 taxpayers comprising 4.5% of the total tax base.

Development projects underway, in addition to ample developable land, are the primary driver of management's estimates of annual TAV growth of 7% over the near term, which appears feasible, albeit slightly optimistic to Fitch. Fitch believes TAV has some sensitivity to oil prices and an overvalued housing market (see Fitch's press release, 'Boom-Bust Cities Now Among Most Overvalued U.S. Housing Markets, dated March 31, 2015). These factors may dampen the growth rate over the next few years.

CONSERVATIVE FISCAL STEWARDSHIP YIELDS STRONG PERFORMANCE
The county's financial position and conservative fiscal stewardship are important credit strengths. Over the last six fiscal years (fiscals 2009-2014), the county has consistently posted general fund balances above its policy to maintain a minimum of 15% of budgeted expenditures despite spending about \$124.5 million or an average of 10% of spending in pay-as-you-go capital projects during the same period. The county's total tax rate remains nominally flat and moderate at just under \$0.50 per \$100 TAV in fiscal 2015.

Unrestricted general fund reserves were approximately \$37 million or 16% of spending at fiscal 2014 year-end. Stronger revenue performance was the primary offset to the nearly \$8 million draw on reserves budgeted for pay-go capital spending; net results after transfers improved to roughly break-even. Liquidity remained sound at \$39.7 million or slightly over two months of general operations. The \$220.1 million fiscal 2015 general operating budget is structurally balanced and maintains the 15% reserve floor. Increased pay-go capital spending, new positions, and pay raises drove much of the 7% year-over-year budget growth that was supported in large part by additional property tax revenue. Management reports revenue and expenditures trends remain generally in line with budget and anticipate maintaining reserves in line with policy at year-end.

HIGH OVERALL DEBT BURDEN LIKELY TO PERSIST
Overall debt levels are high at approximately \$8,360 on a per capita basis and 10% of market value, reflective of the area's rapid growth. Fitch anticipates overall debt levels will remain elevated from continued, growth-related capital and debt needs of various local governments that likely will outpace TAV and population gains made over the near-to-intermediate term. Principal amortization of the county's outstanding direct debt is slightly below average with 45% retired in 10 years.

Capital needs appear manageable over the near term as management has proactively addressed its general purpose facility needs with prior bond proceeds and annual pay-as-you-go funding. Fitch believes the county's historically high level of annual pay-as-you-go spending will likely slow over the intermediate term given expectations of increasing, growth-related operational spending pressures. Direct debt levels may rise as management is considering approaching voters for future bond authorization for a new judicial facility.

The refunding portion of this issuance is projected to provide fairly level annual debt service savings while the new money portion completes the 2007 bond authority for county roads. Management projects minimal tax rate impact from this new money given recent and projected TAV trends. Voters again signaled their support for additional transportation investment with strong approval of a \$185 million mobility (ULT) road bond authorization that is projected to last the county over the next several years for prioritized, non-toll road projects. Fitch expects the county will require additional debt issuance for roads periodically in the intermediate-to-long term given the area's ongoing rapid population gains.

RETIREE LIABILITIES WELL-FUNDED
The county's pension plan is through the Texas County and District Retirement System. The county's funded position in this agent multi-employer defined benefit plan was about 84% as of the most recent Dec. 31, 2013 actuarial valuation date; the county routinely contributes 100% of its annual required contribution (ARC). The unfunded pension liability totals \$420 million or less than 1% of full market value with an assumed investment return rate of 7%.

The county's other post-employment benefits (OPEB) are largely associated with retirees' participation in the county's self-insured health care and have been funded on a pay-as-you-go basis. The actuarially determined net OPEB obligation totaled about \$190 million at fiscal 2014 year-end or under 1% of full market value. Carrying costs for the county (debt service, pension, OPEB costs) totaled a moderate 14.8% of governmental spending in fiscal 2014 due in part to the below-average pace of principal amortization; they are expected to remain manageable over the near-to-intermediate term.