Fitch Affirms Mineral Wells, TX's GOs and Tax Notes at 'AA-'; Outlook Stable
AUSTIN, Texas -- February 8, 2013
Fitch Ratings takes the following action on Mineral Wells, Texas' (the city)
outstanding limited pledge general obligation (GO) and limited tax notes:
--$2.3 million GO refunding bonds, series 2011 affirmed at 'AA-';
--$230,000 limited tax notes, series 2011 affirmed at 'AA-';
The Rating Outlook is Stable.
The GOs and limited tax notes are payable from a direct annual ad valorem tax
levied, limited to $2.50 per $100 assessed valuation, against all taxable
property within the city.
KEY RATING DRIVERS:
SOLID GENERAL FUND RESERVES: Prudent fiscal management is evidenced by
proactive maintenance of high unrestricted general fund reserve levels, which
help to mitigate tax base concentration concerns.
LIMITED, CONCENTRATED TAX BASE: The city's top 10 taxpayers comprise over 20%
of the total tax base, dominated by oil/gas interests. The single largest
taxpayer, a field services company, comprises 7.5%.
RELIANCE ON SALES TAXES: Economically sensitive sales taxes are the dominant
revenue stream and are showing steady, modest annual improvement following
PROXIMITY TO DALLAS/FT.WORTH (DFW) METRO: The city benefits from its proximity
to the DFW metro area.
MODERATE DEBT BURDEN: Key debt ratios are moderate though the direct debt
payout rate is rapid. Pension liabilities are well-funded.
MAINTENANCE OF HIGH FINANCIAL CUSHION: The town's continued ability to
maintain a strong financial cushion is fundamental to the rating and acts as
an important mitigant to inherent revenue volatility and the limited economic
The city of Mineral Wells is located about 45 miles west of Fort Worth (GOs
rated 'AA+' with Stable Outlook by Fitch) within the Barnett Shale natural gas
basin. The city's population of nearly 17,000 has remained flat in the past
SOLID FINANCIAL RESERVES MAINTAINED
The sluggish economy and corresponding revenue declines prompted management to
put its cash funded capital improvement projects to a halt for fiscal years
2010 through 2011 to ensure that the city could maintain an ample cushion for
a prolonged recession. Deferring its capital projects for two years and
implementation of budget cuts enabled the city to further boost fund balance
reserves in each of those two years, despite modest budgeted drawdowns. In the
last five audited fiscal years, the city conservatively maintained ample
reserves ranging from 41.3% of spending to 51%, well above its policy to
maintain two to three months of reserves.
The city resumed its capital spending in fiscal 2012 and again adopted its
budget with a planned drawdown, but reports that sales tax revenues exceeded
budget and expenditures were lower than budget. After transfers for capital
projects, the estimated fund balance drawdown will be smaller than budgeted.
The current estimated unrestricted general fund balance for fiscal 2012 is $4
million, or just over 44% of spending.
The city adopted another moderate drawdown on reserves in fiscal 2013 but
Fitch notes that the city typically budgets conservatively and outperforms its
budgets. However, given the city's concentrated tax base and relatively high
reliance on economically sensitive sales tax revenues, the maintenance of
solid fund balance reserve levels is an important credit consideration to the
city's current rating.
MODERATE DEBT PROFILE
Overall debt ratios are moderate $1,600 per capita and 3.6% of market value
(MV). The city's total tax rate at $0.49 per $100 taxable assessed value (TAV)
is well below the $2.50 levy limit. Direct debt amortizes rapidly with all GO
debt maturing in fiscal 2016.
Mineral Wells' pension plan is administered through the Texas Municipal
Retirement System (TMRS) and is adequately funded at 86% as of Dec. 31, 2010,
based on the TMRS investment rate assumption of 7%. Other post-employment
benefits (OPEB) are also provided by the city through TMRS and pay-go is
nominal for limited benefits, which may be terminated by city council. The
unfunded actuarial accrued liability (UAAL) for pension is $3.2 million as of
Dec. 31, 2010 or a nominal percentage of the city's MV.
LIMITED ECONOMIC BASE
Mineral Wells is the largest city and principal commercial center in Palo
Pinto County and located in the Barnett Shale, the second largest producing
on-shore natural gas field in the U.S. The economic base is limited but
relatively stable. Throughout the last decade, growth in the oil and gas
services and mineral extraction added concentration to the city's tax base
that had historically included more diverse manufacturing. The top 10
taxpayers comprise about 21% of the total tax base with a single taxpayer, BJ
Services Company (a subsidiary of Baker Hughes Inc.), accounting for nearly
The area appears to have fared better than the state and U.S. with lower
unemployment levels during the recession. As of November 2012, the local
unemployment rate at 5.6% remained slightly below the state's 5.8% and well
below the 7.4% U.S. rate. Wealth levels are low at 71% of the state median
household income (MHI) and 69% of the U.S. MHI.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
In addition to the sources of information identified in the Tax-Supported
Rating Criteria, this action was additionally informed by information from
Creditscope, Texas Municipal Advisory Council, and IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated 14 Aug. 2012;
--'U.S. Local Government Tax-Supported Rating Criteria', dated 14 Aug. 2012.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Gabriela Gutierrez, CPA, +1-512-215-3731
Fitch Ratings, Inc.
111 Congress Ave., Suite 2010
Austin, TX 78701
Teri Wenck, CPA, +1-512-215-3742
Jessalynn Moro, +1-212-908-0608
Elizabeth Fogerty, +1-212-908-0526
Press spacebar to pause and continue. Press esc to stop.