DALLAS — Standard & Poor’s upgraded 16 Texas communities Monday, as the rating service continues to look at the underlying credit of smaller town across the Lone Star state.
Standard & Poor’s said it used to constrain the ratings on such issuers because of their location and small tax and population bases, but now the significance of those factors has “lessened in our analysis.”
“We believe that these entities warrant higher ratings because of their stable financial positions and generally high reserve levels, coupled with low debt burdens and very limited capital plans,” credit analyst Paul Jasin said.
“In general, economic activity in Texas remains stable, with low unemployment, minimal impact from the housing slowdown to date, and overall high property tax collections, which, we believe, serve to further stabilize revenues,” he said.
Jasin and fellow credit analyst Horacio Aldrete-Sanchez said the towns “should be bolstered by relatively low property taxes, stable, if not growing, sales tax revenues, coupled with, at least, adequate financial policies. “
Stephenville, with a population of nearly 16,000, was the largest town to receive an upgrade. Standard & Poor’s raised the city’s credit to A-plus from A. The town is about an hour southwest of Fort Worth and the state’s leading milk producer, according to analysts.
All of the communities affected are now in the A rating category.
Also upgraded to A-plus were Aransas Pass from BBB and Bellmead from BBB-plus. Aransas Pass is on the Gulf Coast and a popular tourist and fishing location, according to analysts. Bellmead is a suburb north of Waco.
Two small, farming towns were raised to A-minus. Electra near the Oklahoma border was at BBB-minus previously and Colorado City in central Texas had been at BBB.
Palacios on the Gulf Coast and Burnet, which is about 55 miles north of Austin, were upgraded to A-minus from BBB.
Alvarado, Groesbeck, Prairie View, and Princeton were each raised to A from BBB. Alvarado and Princeton are North Texas exurbs, while Prairie View is about 50 miles northwest of Houston. Groesbeck is about 100 miles south of Dallas.
Both Belton and Westlake were bumped up to AA-minus from A. Belton is in central Texas not far from Fort Hood, the largest Army base in the world. Tiny Westlake with a population of about 700 doesn’t levy a property tax, generating most of its revenues through sales taxes, grants, and contributions. according to Standard & Poor’s. The North Texas town plans to issue $11 million of bonds this year for a wastewater-treatment plant, analysts said.
Glenn Heights, a growing exurb southwest Dallas, was upgraded to A from BBB-plus. The town is now home to more than 10,500, which is up about 45% since the 2000 Census.
Heath, on the other side of Dallas, was raised to AA from A. Heath’s current population of 7,100 is up from 4,100 at the start of the decade and analysts said officials expect the population to swell to 12,500 by 2015.
Jersey Village, which is almost completely surrounded by Houston in northwestern Harris County, was upgraded to AA from A-plus.
Home prices in Texas haven’t declined as much as in other states because the state didn’t see the run-up up in housing prices that occurred elsewhere across the country, according to Standard & Poor’s.
“As such, we believe that any decline in home values, especially in rural areas of the state, will be minimal,” said Standard & Poor’s Jasin and Aldrete-Sanchez.
