OREANDA-NEWS. Fitch Ratings has affirmed the following ratings of the Johnson County Parks and Recreation District, Kansas (the district):

--\\$29.2 million certificates of participation (COPs) at 'AA';
--Implied general obligation (GO) rating at 'AAA'.

The Rating Outlook is Stable.

SECURITY

The COPs are secured by lease payments made by the district equal to principal and interest. Lease payments are payable from any legally available funds of the district, subject to annual appropriation. Properties subject to leasehold interest include various developed and undeveloped parks.

KEY RATING DRIVERS

STRONG DISTRICT CREDIT QUALITY: The district's implied GO 'AAA' rating reflects its continued strong financial results, elevated fund balance levels, healthy economic base, and generally solid financial flexibility.

LEASE STRUCTURE: The COP rating is notched down from the implied GO rating, reflecting the risk of annual appropriation of lease payments and the less-than-essential nature of assets subject to the lease. Positively, each COP series has its own cash-funded debt service reserve fund.

HEALTHY UNDERLYING ECONOMY: The district is located within a diverse and expanding local economic base, which is further augmented by its proximity to the larger Kansas City metropolitan area. Residents display a superior socioeconomic profile, reflecting high wealth, low unemployment, and above-average educational attainment levels.

STRONG DISTRICT MANAGEMENT: A proactive, forward-looking management team continues the district's favorable track record of structural budgetary balance.

MANAGABLE DEBT BURDEN: The district's current debt burden is moderate. Issuances to supplement the district's capital improvement plan (CIP) will be spread out over a 15-year term. The district's capital needs are easily deferrable, if necessary.

RATING SENSITIVITIES

STABLE CREDIT PROFILE: The rating is sensitive to shifts in fundamental credit characteristics, including the district's solid reserve levels and strong management practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

The district is coterminous with Johnson County ('AAA' GO rating with a Stable Outlook by Fitch) and located directly southwest of Kansas City. The district is a bankruptcy-remote component unit of Johnson County. The district's 2014 population of 574,272 represents a cumulative 27% increase since 2000.

VAST PARK DISTRICT SERVING AFFLUENT KANSAS CITY SUBURBS

The district's recreational resources encompass nearly 10,000 acres and received 7.3 million visitors in 2013. Johnson County is home to several Fortune 500 companies, including Sprint and Garmin (together employing roughly 11,000 people) and entities spanning healthcare, government, finance, and engineering services. The county's 3.6% unemployment rate as of March 2015 is well below the state and national averages of 4.4% and 5.6%, respectively. Per capita income levels and educational attainment rates are both well above their respective national averages.

CONTINUED TAX BASE GROWTH
About 95% of the district's revenues are from property taxes. The district can raise its tax rate with a simple majority approval from the Johnson County board of commissioners but it has not done so in a number of years.

Taxable assessed valuation (TAV) posted 1.3% growth for fiscal 2014 after several years of stagnation. Full market value grew by about 5.3% for fiscal 2014 and is substantial at nearly \\$60 billion or a strong \\$104,000 per capita. The county's housing market is highly active and the county continues to experience substantial construction growth in its northeastern-most corner (portion closest to Kansas City).

SOLID FINANCIAL PROFILE

The district completed fiscal 2014 (year-end Dec. 31) with a \\$649,000 surplus, despite budgeting for break-even operations. This surplus increased unrestricted reserves to \\$8.2 million, a very strong 55% of district spending. The district has generated operating surpluses in seven of the last eight years. The district's primary expenditures are debt service, park operations, and capital spending, the latter of which is easily deferred, offering the district substantial expenditure flexibility. The district's 2015 budget is balanced.

The district plans to request a 1.41 mill increase, for approval by the county board of commissioners in mid-August 2015. The increased millage rate would generate \\$256.2 million in revenue over the next 15 years for use in supplementing the district's \\$366.9 million 15-year CIP. The district has a very high level of resident buy-in, with a recent poll of county residents ranking 'parks' as the number one most important county-provided service (ahead of libraries and emergency services).

With such a high level of community support, Fitch believes that it is reasonable to assume that the county board should approve something close to the district's request. The district may draw unrestricted reserves down closer to its strong 25% policy level over the medium to longer term as a supplement to its 15-year CIP.

MANAGEABLE DEBT PROFILE
Aggregate debt levels are moderate at \\$4,247 per capita and 4.1% of market value. The vast majority of the district's overall debt consists of debt issued by overlapping entities. Principal amortization is rapid with 95% repaid within 10 years. The district plans to issue more debt over the next 15 years to supplement its CIP, but the magnitude of future issuance is largely dependent on the county board of commissioner's response to the district's millage increase request. Future issuance is expected to be spread out and have a minimal impact on the district's overall debt profile.
The district participates in two state pension plans through the Kansas Public Employees Retirement System (KPERS), to which it makes the full annual required contributions. KPERS is poorly funded at 60%, or approximately 54% assuming a more conservative 7% discount assumption. Pension costs are likely to increase in the near future, but expected to remain a manageable portion of the district's budget.

The district's exposure to other post-employment benefits (OPEB) is nominal. Carrying costs for debt, pension and OPEB are a high 27% of total governmental spending, though this is less of a concern given the district's limited operating scope.