DALLAS — As it prepares to bring a two-tranche, $35.9 million deal to the competitive market Monday, College Station received an upgrade of its underlying credit to AA from AA-minus by Standard & Poor’s.
Analysts attributed the higher rating to the city’s continued economic-base expansion, “coupled with management’s commitment to maintaining reserves above its target due to conservative budgeting practices.”
Analysts said the predominantly residential property-tax base averaged nearly 10% annual growth this decade, reaching $4.55 billion for fiscal 2008.
“We think management will sustain College Station’s strong financial performance and position and maintain the city’s moderate overall debt levels,” said Standard & Poor’s credit analyst Paul Jasin. “It is also our position that the city’s significant operating dependence on the utility fund and limited economic depth outside the university currently preclude a higher rating.”
College Station, which is home to Texas A&M University and its 45,000 students, plans to offer about $9.5 million of general obligation improvements bonds and $26.4 million of certificates of obligation in a competitive sale Monday.
Insurance for the debt, which is structured as serials reaching final maturity in 2028, will be at the bidder’s option. The higher rating also applies to the city’s $56 million of GOs outstanding and nearly $42 million of outstanding certificates of obligation.
Chief financial officer Jeff Kersten said some proceeds from the certificates will fund construction of a new city-owned cemetery, which officials have been talking about for about 10 years, as space is running out at the current cemetery. He said some A&M alumni that used to live in College Station have expressed a desire to be interred within the city.
About $16 million of the certificates will be used to upgrade electric, water, and wastewater utilities. Kersten said the city wants to acquire land now for future well sites in order to continue to provide adequate water supply for a growing population.
The city’s current population of about 89,140 is up nearly 32% from the start of the decade and more than double the 1980 Census figure of about 37,200 residents. The estimated fiscal 2009 taxable assessed value of $5.02 billion is 10% higher than the year earlier and almost double the 2002 figure.
Standard & Poor’s said university officials also plan to incrementally expand the student base by about 5,000 and hire an another 400 faculty members over the intermediate term, further fueling growth in the central Texas town.
Moody’s Investors Service assigned its Aa3 rating to the sale. Analysts said the city ended fiscal 2006 with nearly $11 million in reserves, or an ample 25% of general-fund revenues, which is “well in excess” of policy to maintain reserves at 15% of revenues.
First Southwest Co. is the financial adviser to the growing city. McCall, Parkhurst & Horton is bond counsel.
College Station has roughly $7 million of unissued debt remaining from a 2003 bond package with no plans to issue more this year.
Kersten said officials are considering another bond election in November for possibly as much as $110 million. About $26 million would be for a new city hall, while the remaining $84 million would fund continued improvements for streets and parks, a new fire station, a new community center, and expansions to libraries among other projects.