OREANDA-NEWS. Fitch Ratings has affirmed the 'BBB+' rating on the following bonds of Cordillera Metropolitan District, Colorado:

--$4.6 million unlimited tax bonds, series 2006A.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the consolidated Cordillera Metropolitan District (the district), payable from an unlimited ad valorem tax levied on all taxable property within the district.

KEY RATING DRIVERS

RELIANCE ON CONTRACTUAL PAYMENTS: Contributions from the Cordillera Property Owners Association (CPOA) provide the district with significant operating and financial support. The long-term trend for these revenues and district property taxes hinges on the viability of the district's key asset, the Club at Cordillera (a golf and recreational facility), which has fueled the overall desirability of the community.

ASSESSED VALUATION (AV) GROWTH RESUMES: The district's tax base consists primarily of high-end second homes located within the Greater Vail Valley. Recovering home values produced a significant AV increase for 2016, partially offsetting declines in the past two revaluations.

STABLE FINANCIAL OPERATIONS: District financial operations are characterized by nominally small but adequate reserves and liquidity. The district's operating mill rate is competitive with neighboring communities, and may be adjusted to generate additional revenue each year.

MANAGEABLE DEBT PROFILE: Debt ratios are moderately low, no additional debt is expected, and existing obligations are repaid very rapidly.

RATING SENSITIVITIES
STABLE CLUB PERFORMANCE: The rating is sensitive to changes in operating performance of the Club at Cordillera, due to the high level of economic and revenue concentration the club represents. This concentration level makes positive rating action unlikely.

CREDIT PROFILE
The district is an affluent residential golf community located in the Greater Vail Valley 20 miles from the Vail/Eagle County regional airport. Formed in 1993, Cordillera experienced relatively rapid development during the 1990s and 2000s as wealthy second-home buyers were attracted by the district's high-quality amenities and proximity to the Vail and Beaver Creek resorts. The district is very small and comprises mostly second-home owners. There are 900 pad sites, of which 574 or 64% are currently built out. Recent development activity has been slow.

STABLE GOLF CLUB MEMBERSHIP
The Club at Cordillera is the community's primary amenity and selling point, and consists of three signature golf courses, a tennis center and fitness facility, and one outdoor pool. Following the settlement of litigation over financial troubles and membership contracts that led to a Chapter 11 bankruptcy, the club was sold to new owners in December 2012 who appointed an experienced golf course manager (Troon Golf). The new owner and operator have reopened the club's facilities and rebuilt membership to essentially the level prior to bankruptcy.

CPOA funding to the district was sharply reduced in 2012 due to operational pressures caused by the litigation, but this funding returned to prior levels in 2013. The 2016 budget projects combined contributions of $1.5 million for operations and debt service, an increase of 140% over 2012.

2016 AV GROWTH
A precipitous drop in area home values resulted in a cumulative tax base decline of 45% between 2010 and 2015. The valuation losses wiped out all of the district's AV gains between 2000 and 2010. However, home values have recovered in recent years and modest residential construction has resumed, producing a large 23% increase in AV for the district's 2016 reassessment.

Officials anticipate positive reappraisals in the next reassessment cycle (2018), which Fitch views as reasonable given upward trends in home sales and prices. Zillow reports a 31% increase in Eagle County home values from 2012-2016. Revenue risk related to any future tax base declines is somewhat offset by a 2003 voter-approved measure that allows the district to adjust its operating mill rate to generate a similar level of property tax revenues as the year before, plus up to 5.5%.

HISTORICALLY STABLE FINANCIAL PROFILE
District financial operations are limited, with an annual general fund budget of approximately $5 million. The 2014 unrestricted general fund balance was equal to $1.4 million or a sound 29% of spending, with liquidity sufficient to cover over eight months of operating costs. Unaudited results for 2015 point to a moderate surplus that will maintain this level of reserves.

Approximately 62% of general fund revenues are derived from property taxes. Property tax revenues for 2014 and 2015 were similar to prior years. An additional 24% of general fund revenue is received from district service charges, mostly composed of payments to the district from the CPOA for administrative services.

Due to the higher property valuation for 2016, management decreased the district's property tax millage rate for operations, to a rate still sufficient to raise general fund tax revenue by 5.5%, or approximately $186,000. The 2016 budget also reflects a $1 million transfer (20% of spending) to fund one-time capital outlays. Fitch expects the district to maintain its financial position in 2016.

MANAGEABLE DEBT BURDEN
Overall debt is moderately low, especially when compared with the district's wealthy tax base, as indicated by overall debt-to-market value of 1.9%. Debt service costs are very high at 36% of 2014 governmental fund spending, which is not unusual for limited-purpose entities.

Bonds amortize rapidly with 100% of principal retiring in seven years. In 2010, district voters approved a $15 million bond authorization to be used solely as a last resort to purchase the assets of the golf club. The district has no plans to issue this additional debt.

The district has no long-term liabilities related to its employees, as the district participates in a defined contribution pension plan and does not provide retiree health care benefits.