S&P Upgrades Dallas Suburb of Carrollton to AAA

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DALLAS - Standard & Poor's yesterday raised its rating on the Dallas suburb of Carrollton to AAA from AA-plus, citing the city's strong general reserve funds, revenue-raising flexibility, and proactive budget-cutting efforts in periods of revenue softness.

The upgrade comes as the city prepares to issue $40 million of general obligation bonds for streets, sewers and other infrastructure and to refund a 1999 issue for interest cost savings.

"In our view, the AAA rating reflects the city's deep, diversified economic and employment base, and participation in the solid Dallas-Forth Worth economy; well diversified local economic base; very strong wealth and income levels; and conservative and sophisticated financial management policies that include long-range budget and capital plans," wrote analysts Sarah Smaardyk and James Breeding in Dallas.

Carrollton joins the neighboring Dallas County suburb of Irving on the triple-A list. Moody's Investors Service rates Carrollton's general obligation debt Aa2, while Fitch Ratings affirmed its AA-plus.

The city's top taxpayer and major employer, ST Microelectronics, announced plans in July of 2007 to close its plant over a three-year period, eliminating 1,000 jobs. The city's tax base will take a $126 million loss with the company's closing this month. But the city has seen recent expansions or additions from major employers.

"While Fitch notes that the city's largest single taxpayer will end production in March 2009, the company makes up only a small percentage of the total tax base," analysts there noted. "Management has indicated additional commercial development is expected to more than offset this."

Lying in parts of Dallas, Denton, and Collin counties in the Dallas-Fort Worth metroplex, Carrollton is home to 120,500 people. Large employers include Mary Kay Cosmetics, Freddie Mac, Halliburton Energy Services, Frito Lay, and Sara Lee.

The city's tax base, which recorded steady annual growth for the past decade, has posted slower rates of growth over the past several fiscal years as the city has matured. Since fiscal 2003 taxable assessed valuation has increased on average 3% annually, well below the growth rates recorded over the previous two decades.

Transit related development near three light rail stations scheduled to open in December 2010 is expected to spur more development within the city. The development of the Dallas Area Rapid Transit system rail lines and an adjoining commuter rail line from Denton to the north is expected to boost the tax base by $1 billion. Carrollton's multiple rail lines will allow it to eventually become one of three mass-transit rail hubs in the Metroplex.

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