DALLAS — The city of McKinney is bringing four tranches of debt for about $38 million to the competitive market next week, as the growing north Dallas suburb looks to update infrastructure to meet the needs of a population that’s doubled this decade.
On Tuesday, the city plans to offer $14.2 million of tax and limited-pledge waterworks and sewer system certificates of obligation, $9.8 million of waterworks and sewer system revenue bonds, $7.2 million of general obligation bonds, and $6.7 million of taxable waterworks and sewer system COs.
The taxable certificates mature next year through 2017, while the rest of the debt is structured as serials maturing in 2011 through 2029.
Jennifer Fung, executive director of finance, said proceeds will fund upgrades to the city’s drainage system as well as expansion of streets, new roadways and new traffic signals. Proceeds also will be used to clean up parks and creeks, and pay for construction of a new fire station and an aquatic center.
In May 2006, voters approved a $91.6 million bond package. Following next week’s issue, about $44.5 million of that authorization will remain unissued. Officials expect to continue selling the bonds in various installments through the end of next year.
Fung said the city anticipates coming back to the market next spring with another GO issue.
Southwest Securities is the financial adviser to the city and Fulbright & Jaworski is bond counsel.
The population of McKinney, which is about 30 miles north of Dallas, more than doubled in the 1990s to 54,369 at the 2000 Census and has more than doubled again this decade to about 122,100 residents.
Standard & Poor’s assigned a AA-plus rating to each tranche selling next week, citing the city’s access and participation in the north Texas economy, deepening property-tax base, and “very strong income and reserve levels.”
Analysts said the city’s unreserved general fund balance at the end of fiscal 2008 was roughly $43 million, or 50% of operations. Officials anticipate ending fiscal 2009 with a $29 million unreserved general fund balance following a drawdown to fund new positions and other staff-related costs, although “the city has historically out-performed its budget,” according to Standard & Poor’s.
Moody’s Investors Service assigned its Aa2 rating to each series of debt. Analysts said the ratings reflect McKinney’s ongoing economic development and population growth “along with very strong financial practices that reflect an organization capable of managing historically rapid growth.”
Some mitigating credit factors include considerable debt with plans for continued debt issuances annually.
Moody’s said the estimated built-out population of the city is about 400,000, which could occur in another 25 or more years. The city’s tax base averaged nearly 14% annual growth the past five years to $10.5 billion for fiscal 2009, according to analysts.
Fung said officials chose to sell the debt competitively in hopes of achieving a better rate and she also expects the high ratings to help lower the interest rate on the debt.
“For our size, we have very good ratings and that’s because we have very strong financials and low debt per capita,” she said.
