Moody's Investors Service said it has downgraded to A2 the city of Giddings, Texas's general obligation limited tax bonds.
The rating action affects $11.4 million in Moody's rated debt. The bonds are secured by a direct and continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the city.
The A2 rating reflects the city's small tax base, which experienced modest overall growth in recent years due to commercial and residential development, as well as pressured financial performance.
The city relies heavily on its utility funds, which have limited liquidity, and sales tax collections, an economically-sensitive revenue stream, to support general fund operations.
The general fund appears healthy despite draw downs; however, included in the balance is an aged receivable, the collection of which is uncertain. Additionally, the city's cash reserves are narrow and limited. The rating further reflects the city's weak socioeconomic profile and management's unwillingness to maintain consistent structural balance.
The ratings are under review for possible downgrade, which reflects a lack of sufficient financial information from the city. Audit disclosure is not sufficient to determine how the city intends to manage the aged receivable included in the general fund balance.
