NEW YORK - Standard & Poor's Ratings Services said it has raised its underlying rating (SPUR) on Grand Lakes Municipal Utility District (MUD) No. 1, Texas' general obligation (GO) bonds to A from A-minus. The outlook is stable.

Standard & Poor's also assigned its A long-term rating to the district's $4.545 million series 2012 unlimited-tax refunding bonds. The outlook is stable.

The upgrade reflects Standard & Poor's view of the district's stable and developed property tax base, which has allowed the district to decrease its property tax rate and provide for future financial flexibility. Given this decrease to the property tax rate and the maintenance of a strong reserve position, the district's increased financial flexibility provides further credit stability.

"We believe that the MUD will likely sustain finances that we consider very strong and that the MUD's completed infrastructure development will likely limit any additional debt-supported capital needs," said Standard & Poor's credit analyst Daniel Cuddy. "Furthermore, given the district's mature status and limited capital plan, we anticipate the high overall debt levels to moderate over time. We do not anticipate raising the rating during the two-year outlook horizon," he added.

The rating also reflects Standard & Poor's opinion of the district's: participation in a master-planned community, mature development, limiting any future significant additional capital needs, very low property tax rate, and very strong financial position.

Standard & Poor's believes the district's high overall debt somewhat constrains the rating.

An unlimited ad valorem tax levied on all taxable property in the district secures the bonds. Officials will use the bond proceeds to refund a portion of the district's outstanding debt for annual debt service savings.

The 393-acre Grand Lakes MUD No. 1 is about 22 miles southwest of downtown Houston, and is entirely within Houston's extraterritorial jurisdiction and Katy Independent School District's boundaries. MUD No. 1, along with two other MUDs, serves the 1,250-acre Grand Lakes, Texas master-planned community.

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