OREANDA-NEWS. August 31, 2015.  Fitch Ratings has affirmed Parker, Colorado's (the town) outstanding obligations as follows:

--\\$8.6 million sales and use tax revenue bonds, series 2006 at 'AA'.

The Rating Outlook is Stable.

SECURITY

The bonds are a special, limited obligation of the town, payable solely from a first lien on revenues derived from the town's 2.5% general sales and use tax.

KEY RATING DRIVERS

GROWING LOCAL ECONOMY: Recent population growth and higher demand in the regional housing market has led to solid tax base increases and healthy sales tax revenue gains.

STRONG FINANCIAL FLEXIBILITY: The town maintains a high level of financial flexibility; prudent financial management is reflected in robust reserves and liquidity, helping offset the potential volatility associated with significant sales tax revenue dependence.

MIXED DEBT PROFILE: Current debt levels remain elevated due to sizable overlapping debt, and the pace of principal amortization is moderate. However, total carrying costs for debt, pension, and other postemployment benefits are affordable and expected to remain so.

ABOVE-AVERAGE ECONOMIC INDICATORS: The town exhibits above-average economic and demographic factors, including high wealth and education levels and low unemployment. Much of the labor force works outside of the town, taking advantage of the close proximity to the Denver metropolitan area and its diverse employment opportunities.

RATING SENSITIVITIES
RESERVES OFFSET RELIANCE ON SALES TAX: Management's maintenance of large reserve levels is necessary to mitigate the risks posed by the town's heavy reliance on economically sensitive sales tax revenue for operations.

CREDIT PROFILE
The town of Parker is a growing bedroom community located 26 miles southeast of downtown Denver (GOs rated 'AAA'/Outlook Stable by Fitch). The 2014 estimated population is 48,800.

LOCAL ECONOMY BENEFITS FROM PROXIMITY TO DENVER

The town is a growing suburb of Denver with access to the MSA's diverse economy and employment opportunities. Town residents are highly educated, and wealth levels are above average with median household income equal to 165% and 185% of state and national averages, respectively. The town's March 2015 unemployment (3.6%) was lower than both the state (4.5%) and the nation (5.6%).

Parker has seen relatively strong population growth, and as a result, higher demand for housing as the Denver economy continues to grow. Stroh Ranch, a large residential subdivision, is expected to break ground in 2016 and ultimately is projected to bring 6,000 new homes and nearly 20,000 new residents to the town. Since 2012, taxable assessed value (TAV) has demonstrated an upward trend due to new construction and reappraisal gains.

STRONG COVERAGE BY PLEDGED REVENUES
Debt service coverage in 2014 was ample at 25.3x maximum annual debt service (MADS). Debt service is level, amortization is average, and the town reports no plans to issue additional debt secured by the 2.5% tax. The additional bonds test (ABT) requires 2.5x coverage of MADS in the previous year, providing solid bondholder protection. In Fitch's view, the likelihood of leveraging the sales and use tax revenue stream to the ABT is remote given the town's dependence on sales tax revenues to fund general government operations.

SALES TAXES PROVIDE MAJORITY OF OPERATING REVENUES

Town operations are heavily reliant on sales tax revenues, which constituted about 67% of total general fund revenue in 2014. Despite the inherent volatility, sales tax performance was stable during the most recent recession (due primarily to the opening of a Costco in 2008). Receipts have grown rapidly since then, with 2014 receipts 35% higher than in 2009. Management reports sales tax revenues through the first seven months of 2015 are up 8.3% year-over-year.

Sales tax collections for 2016 are budgeted to increase by 6% over 2015 projections, based on population growth and inflation assumptions. Officials expect sales tax revenue growth to continue to grow in subsequent years. Fitch believes this expectation is plausible, given the strong population growth and the opening of a new King Sooper grocery store in November.

Property taxes comprised a small 3.9% of general fund revenues in 2014. This minimal reliance, combined with a lack of any outstanding general obligation bonds, has led to a relatively low property tax rate. Voters waived property tax revenue growth restrictions in 1996.

FUND BALANCE DRAWS RELATED TO CAPITAL

In 2013 the general fund ended with a net operating deficit after transfers of \\$2.3 million, due to planned capital spending for land development and preconstruction expenses for a new facility. Conversely, 2014 ended with a net surplus of \\$1.7 million (4.3% of spending), resulting in a sizable unrestricted fund balance of \\$19.4 million or 49.5% of spending.

The town projects it will end 2015 (fiscal year ending Dec. 31) with a general fund net operating deficit after transfers of \\$1.1 million (2.3% of spending), which is smaller than the \\$5.7 million loss that was budgeted. The use of general fund balance is largely attributable to a one-time transfer of \\$3.5 million to the parks and recreation fund for a recreation center expansion project. This draw will bring the town's unrestricted general fund balance down to a still solid 38.7% of budgeted 2015 spending.

In 2016, the town will likely draw on general fund reserves again to offset one-time expenditures related to software replacements (\\$2 million) and a new economic incentive reimbursement for King Soopers (increasing the reimbursement costs for the city from \\$576,000 to \\$1.3 million). Following several years of revenue growth, the town has also appropriated general fund balance on and off to fund deferred maintenance projects. The town plans to continue drawing on fund balance for capital purposes as strategic projects arise, but Fitch expects reserves to remain robust given the reliance on economically sensitive sales tax revenues.

WEAK DEBT PROFILE BUT LOW ANNUAL CARRYING COSTS

As of 2014, principal amortization is moderate with 46.3% of outstanding debt retired within 10 years. As a result of the sizable overlapping debt of local special district, the town's overall debt burden is high at 6.6% of total market value or \\$6,678 per capita.

The town will hold an election in November 2015 to seek voter approval for an increase in the current 0.5% parks and recreation portion of the sales tax by another 0.5% (bumping the total sales tax rate to 3.5% from 3.0%), and for authorization to issue roughly \\$40 million of sales tax bonds for parks and recreation projects (secured by the parks sales tax). If approved by voters, the projected annual increase in sales tax revenue of \\$6.5 million would be sufficient to pay debt service on the new bonds and provide additional funds for ongoing park maintenance.

The town contributes to a state-run defined benefit pension plan for police and fire employees, as well as a town established defined contribution plan for all other town employees. The town does not provide other postemployment benefits for any employees. The town's carrying costs (comprised of its debt service payments and pension contributions) were an affordable 7.65% of governmental spending in 2014.