DALLAS - Continued economic expansion and strong financial performance resulted in Brazoria County, Tex., receiving two rating upgrades ahead of a two-tranche, $18 million deal.
Both Fitch Ratings and Standard & Poor's raised the underlying credit of the Gulf Coast county to AA from AA-minus.
Fitch analysts said the upgrade reflects tax-base diversification and "prudent fiscal management that has enabled the county to increase its unreserved general fund balance to a very healthy level while managing a rapid population growth."
Moody's Investors Service rates the county's credit at Aa3 but had not issued a rating for the new bonds as of yesterday.
In about two weeks, Brazoria County plans to issue $10 million of general obligation refunding bonds and $8 million of road bonds in a negotiated sale with First Southwest Co. as senior manager.
The new-money component of the sale is the second slice of a $50 million bond package passed by voters in November 2004 for road upgrades. Following the upcoming deal, the county will have about $37.2 million of outstanding debt and $28 million of authorized but unissued road bonds, according to analysts. County officials plan to issue the remaining road bonds over the next three years.
Estrada Hinojosa & Co. is the financial adviser to the county. Allen Boone Humphries Robinson LLP is bond counsel.
Donald Gonzales, managing director at Estrada Hinojosa, said the county awaits a rating decision from Moody's and it may be another upgrade. He also said the bonds - which are set to price June 9 - may be insured "if it makes sense financially." Insurance "may not be cost effective" for the refunding bonds due to the upgrades and the short maturities of the debt, he added.
Coastal Securities Inc. and Southwest Securities Inc. are co-managers for the deal.
Gonzales said the upgrades are also a reflection of the continuation of what the county has been doing for several years. He said the various governmental entities across Brazoria work extremely well together, and proceeds from the road bonds represent the county's share of some joint projects.
The county's largest city, Pearland, has watched its population more than double since the 2000 Census to roughly 75,000 from 37,640 at the start of the decade. Some projections show the population of the Houston suburb swelling to nearly 150,000 residents by 2020.
Standard & Poor's cited the county's expanding economy, with easy access to the Houston metropolitan area, strong wealth and income levels, and "proactive budget management" in the upgrade.
Gonzales said the commissioners' court and other elected officials are active in the budget-planning process, staying relatively conservative in their fiscal management.
The county ended fiscal 2007 with a $6.7 million general fund surplus, pushing the fund balance to $23.8 million. Brazoria County is one of a few in Texas with a half-cent sales tax levy, providing revenue diversity, according to Standard & Poor's.
The taxable assessed value of the county has risen steadily the past five years, including double-digit gains in 2006 and 2007, to $18.9 billion for fiscal 2008. Analysts attributed much of the growth to residential development. The county said "building permit values more than tripled in fiscal 2005" and at least 60% of valuation growth is due to construction of new single-family homes "reflecting a significant shift in tax base concentration," according to Fitch.
About 57% of the tax base was commercial and industrial in fiscal 2002, whereas now it's closer to 43%, while the residential ratio climbed to 44% of the current tax base from 35% five years ago, analysts said.