FITCH RATES CITY OF BROWNSVILLE: OUTLOOK STABLE

"... collection volatility remains a credit risk given the economic fluctuations inherent to many border communities." ... Fitch Ratings

AUSTIN, Texas, Nov 15, 2011 (BUSINESS WIRE) -- Fitch Ratings assigns the following ratings to the city of Brownsville, Texas (the city) securities:

-- $17.385 million limited tax refunding bonds, series 2011A 'AA-'.

The bonds are expected to price via negotiation the week of Nov. 21, subject to market conditions. Proceeds will be used to refund a portion of the city's outstanding GO bonds.

In addition, Fitch affirms the following ratings:

-- $140.4 million limited tax bonds and certificates of obligation (COs) at 'AA-';

-- $17.5 million Brownsville Community Improvement Corporation (BCIC) sales tax bonds at 'AA-'

The Rating Outlook is Stable.

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 SECURITY

The GOs and COs are secured by an annual property tax levy, limited to $2.50 per $100 of taxable assessed valuation (TAV). The COs are additionally payable from surplus revenues of the city's municipal landfill. The BCIC sales tax revenue bonds are secured by a 1/4% sales tax.

KEY RATING DRIVERS

Adequate Liquidity: Positive credit factors include sound financial management and adequate reserves, although reserves have weakened due to the recession. The city's adopted fiscal 2012 budget includes a surplus largely attributable to cost savings which are expected to bolster the general fund balance.

Economic Growth: Tax base and economic growth has remained positive despite the recession, but the region continues to experience structurally high unemployment and low wealth levels. Proximity to Mexico and an extensive and expanding transportation network support strong international trade activity.

Manageable Leverage: The city has a moderately high debt burden, offset to a degree by limited additional borrowing needs. Principal amortization is rapid, with 72% of principal scheduled to be repaid within 10 years.

Solid Coverage: BCIC sales tax bond debt service coverage remains solid, but collection volatility remains a credit risk given the economic fluctuations inherent to many border communities. Notably, fiscal 2011 sales tax receipts rebounded following two years of modest declines.