Handful of Smaller Texas Issuers Get Upgrades From S&P, Moody's

DALLAS - As many communities in other states face mounting financial pressures due to the recession, the economy in much of Texas keeps humming along, with some smaller municipalities reaping the benefits through upgrades of their underlying credit ratings.

Upgrades indicate the improved credit quality of an issuer and often lead to lower costs of borrowing.

This week, Standard & Poor's raised its rating on two series of bonds issued by the Brazos River Authority. Analysts upgraded its surface water and treatment system bonds two notches to A-plus from A-minus due to the "improved general creditworthiness of the obligor, Johnson County Special Utility District."

Other factors strengthening the credit include the system's participation in the Fort Worth metropolitan area, strong debt service coverage, healthy cash position, and a manageable capital improvement plan that the authority will finance from internally generated funds.

Standard & Poor's also boosted the underlying rating of the bonds issued by the BRA on behalf of the Temple-Belton regional sewerage system to AA from A-plus. Analysts cited the creditworthiness of Temple's waterworks and sanitary-sewer system based on legal agreements that bind the cities to the authority "in a joint pledge with an implied unlimited step-up provision."

Temple, Belton and Killeen, serve as a regional economic center in central Texas about halfway between Austin and Waco. The utility system serves about 22,000 customers "in an area that remains one of the more rapid-growing metropolitan statistical areas in the state," according to analysts.

Moody's Investors Service upgraded tiny Hill Country Village to A2 from A3, citing the suburban San Antonio town's strong financial position "reflected by a general fund balance equaling 86.9% of fiscal 2008 revenues."

The higher rating applies to about $1.5 million of parity debt outstanding. Analysts said the town's general fund balance increased 175% since 2004, "creating a very strong financial cushion in the event of any unexpected decline in sales tax receipts."

Roughly 1,100 people live in Hill Country Village, which was founded in 1956 and is about 15 miles north of downtown San Antonio.

Moody's also raised the underlying rating of Socorro to Baa1 from Baa2 because of the West Texas town's healthy financial position that's supported by strong management, and a modestly sized and growing tax base with moderate debt. Analysts said the rating also is indicative of the border city's significantly below-average wealth levels.

Standard & Poor's also upgraded the Granbury Independent School District to A-plus from A due to its limited capital needs.

Additional credit strengths include the district's primarily residential community within the Fort Worth-Arlington metropolitan area coupled with direct access to the greater Fort Worth employment base, analysts said. Good wealth and income levels, strong economic and property-tax base growth, a very strong financial position, and a manageable debt burden with limited needs further strengthen the credit.

The area "is a significant tourist destination and second-home community due to its location on Lake Granbury and access to Fort Worth," according to analysts. About 35 miles southwest of Fort Worth, Granbury ISD serves an enrollment of about 6,700.

Standard & Poor's elevated the credit of the Barbers Hill Independent School District three notches to AA-minus from A-minus due to its continued positive performance despite pressures from enrollment growth and state-mandated wealth transfers. Analysts also revised the outlook on the district to stable from positive.

Barbers Hill ISD serves nearly 4,000 students at seven campuses about 30 miles east of Houston.

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