OREANDA-NEWS. Fitch Ratings assigns an 'AAA' rating to the following Arlington, Texas limited tax securities:

--$45.2 million permanent improvement refunding bonds, series 2016.

The bonds are scheduled for competitive sale on March 2. Proceeds from the bonds will be used to redeem outstanding obligations for debt service savings.

In addition, Fitch takes the following rating actions:

--$383.9 million in outstanding bonds and certificates of obligation (COs) affirmed at 'AAA'.

The Rating Outlook is Stable.

SECURITY

The bonds and COs are payable by an ad valorem tax levied on all taxable property within the city, limited to $2.50 per $100 taxable assessed valuation (TAV). COs are also secured by a pledge of limited surplus revenues ($1,000) of the city's water and waste water system.

KEY RATING DRIVERS

CONSISTENT OPERATING PERFORMANCE: Arlington's strong financial performance reflects the city's ability to manage expenditures at a rate below its healthy revenue growth. Reserves provide a healthy financial cushion.

MATURE, STABLE LOCAL ECONOMY: The city is mature with a diverse tax base. Low unemployment reflects historic growth in the local and regional job market.

STRATEGIC LOCATION; GROWTH PROSPECTS: Arlington benefits from its central location in the Dallas-Fort Worth (DFW) metropolitan area and status as a regional hub for entertainment and tourism. Fitch expects local economic growth in the near to medium term based on development and business expansion currently underway.

MANAGEABLE DEBT; SOUND PENSION: Overall debt metrics are moderately high but debt is repaid rapidly and capital needs are manageable. The city's pension plan is well-funded.

RATING SENSITIVITIES
LONG-TERM LIABILITIES; FINANCES: Fitch expects the city will continue to manage its finances in a prudent manner and that its debt burden will gradually decline over time given economic growth prospects, limited capital needs and rapid amortization of existing debt.

CREDIT PROFILE

Arlington is located in the center of the DFW metroplex (about 20 miles west of Dallas) with an estimated 2016 population of 370,367. The city is home to two professional sports franchises, the National Football League's Dallas Cowboys and Major League Baseball's Texas Rangers.

DIVERSE, RESILIENT ECONOMY IN THE HEART OF DFW

The diverse Arlington economy includes manufacturing, distribution, and retail trade, benefiting from its proximity to the DFW International Airport and well-developed highway transportation network. Tourism is a significant component of the local economy. Attractions include popular amusement parks and professional sports franchises which are a major draw for residents from the area and around the state. Arlington's tax base is broad and TAV has realized five consecutive years of growth averaging 2.5% subsequent to a recessionary dip in fiscal 2011.

Higher education rounds out the economic base with the presence of The University of Texas-Arlington (UTA), a growing 38,600 enrollment campus that continues to invest in facility improvements. Other top employers include the Arlington Independent School District, General Motors and GM Financial, Texas Health Resources, Six Flags Over Texas, JP Morgan Chase and the Texas Rangers Baseball Club.

Arlington's December 2015 unemployment rate of 3.7% compares favorably to state (4.2%) and national (4.8%) averages for the same period. Fitch anticipates that near term growth, including the $1.4 billion GM plant expansion and DR Horton relocation will drive additional employment and tax base gains into fiscal 2017.

SOLID FINANCIAL PROFILE

The city's finances are characterized by revenue diversity, structurally balanced operations and sound reserves. Property taxes and sales taxes are the primary revenue sources, comprising 68% of fiscal 2015 general fund revenues. Expenditure flexibility remains following modest cost saving measures undertaken during the recession. Fiscal 2015 unrestricted reserves of $56.7 million represent a solid 25.9% of spending. Based on fiscal year to date performance and spending priorities, the city projects completing fiscal 2016 with generally similar reserves.

Strong results are supported by the city's long-term planning and reserve policies. The city maintains a 15% minimum general fund balance policy. Included therein are a one-month working capital reserve, an unallocated reserve for emergencies, and a business continuity reserve that provides funding for operational needs as-needed.

In addition, the city maintains a community foundation dedicated to cultural/quality of life projects and neighborhood revitalization. The endowment has grown substantially since its incorporation in 2007 with a current balance of $51.9 million subsequent to the expenditure of $50 million of the fund's corpus during fiscal 2016 in a strategic partnership with the Texas Rangers sports franchise to develop local hotel and event space. The city anticipates rebuilding the reserve over 15 years.

MANAGEABLE DEBT; WELL-FUNDED PENSIONS

Voters overwhelmingly approved $236 million in general obligation (GO) bonds in November 2014 to support street, park and recreation, fire facility and library improvements. The city's unissued authorization of $262 million compares to 10-year GO principal amortization of about $250 million.

Arlington's manageable capital plan reflects the city's maturity and disciplined attention to infrastructure needs. Fitch anticipates the city's debt burden to gradually decline in the medium term based on the city's capital planning forecast and rapid amortization schedule. The capital budget includes $160 million for general government infrastructure expenditures over the next several years. Overall debt represents 5.3% of market value and includes a sizable overlapping debt component.

The city participates in the Texas Municipal Retirement System, an agent multiple-employer defined benefit plan. Under GASB Statement 68, the city reports a fiscal 2015 net pension liability (NPL) of $104.6 million, with fiduciary assets covering 90% of total pension liabilities at the plan's 7% investment return assumption. The NPL of the plan represents a very small 0.4% of the city's fiscal 2015 market value.

The city administers a single-employer retiree health care plan with an unfunded liability representing less than 1/2 of 1% of fiscal 2015 market value. Carrying costs including annual debt service, pension and other post-employment benefit contributions represent an elevated 27.2% of fiscal 2015 governmental spending, reflecting the rapid 78% 10-year principal amortization rate for outstanding debt.