DALLAS — As debate continues nationally about restructuring the rating scales of municipal bonds, a suburban Dallas city received an upgrade on its general obligation debt to triple A.
Richardson plans to competitively offer $10.7 million of certificates of obligation Monday following an upgrade to AAA from AA-plus from Standard & Poor’s. Insurance will be at bidder’s option, although city finance director Kent Pfeil said the now gilt-edged underlying rating may negate the need for insurance.
Pfeil attributed the upgrade to the city’s strong financial practices and policies, and the fiscal strength provided by a well-tenured staff.
“It’s also due, in part, to the actions of our past and present City Council, as well as our service-delivery strategies and the efforts of the economic development partnership in the city,” he said.
Standard & Poor’s cited management’s “maintenance of strong reserves established by policy, which would likely allow the city to maintain its elevated financial condition even in the event of fiscal stresses such as the 2000-2002 downturn in the telecommunications sector that affected the area, as well as the current economic contraction.”
Located just north of Dallas, Richardson is home to about 102,000. The population is up more than 11% since 2000, and most surrounding North Texas towns are also expanding. The Dallas-Fort Worth area added about 162,250 new residents between July 1, 2006 and July 1, 2007, making the metroplex the fastest-growing area of the country, according to the Census Bureau.
Richardson joins Plano and Irving as Dallas suburbs carrying triple-A ratings on GO debt. The state capital of Austin is the only other Texas city with the highest possible rating. The population of Plano, which forms Richardson’s northern border, has increased more than 20% this decade to nearly 270,000. Irving sits northwest of downtown Dallas with a population of about 205,600.
Richardson is in both Dallas County and Collin County each of which are rated triple-A.
First Southwest Co. is the financial adviser to Richardson and Fulbright & Jaworski LLP is bond counsel.
Moody’s Investors Service assigned its Aa1 rating to next week’s issue and affirmed the rating on the city’s roughly $264.4 million of GO debt outstanding, including the sale. Fitch Ratings doesn’t rate the city’s credit.
Once a typical, highly residential suburb, Richardson has evolved into a major employment center over the past 30 years with a “significant presence of technology-based companies” especially telecommunications firms and “very strong income and wealth levels,” according to analysts.
The property tax base “is deep and extends beyond its telecom corridor with other sectors including health care, technology, and finance,” analysts said.
Richardson’s 2008 taxable-assessed value of $9.48 billion is up 12% from five years ago.
Moody’s analysts said the city “will continue to face economic challenges, including office vacancy rates that are still relatively high; however, a number of development initiatives are underway or in planning stages that should provide strong long-term growth.”
And city officials “have preserved sufficient financial flexibility in order to maintain a strong financial position through periods of economic weakness,” according to analysts.
Richardson has roughly $3 million of unissued debt remaining from a 1997 authorization of $78 million. Officials expect to issue $13.5 million of COs over the next four years in average annual installments of about $3.3 million.
Proceeds from next week’s sale will fund improvements to city hall, an animal shelter, and the water and sewer system, as well as equipment purchases for city services. The certificates, which are structured as serials reaching final maturity in 2028, are callable at par in 2018.
