Princeton Gets Downgrade

Fitch Ratings has downgraded Princeton to BBB from BBB-plus as the town, located northeast of Dallas, prepares to sell $1.6 million of general obligation refunding bonds and $8 million of combination tax and surplus revenue certificates of obligation through negotiation with Piper Jaffray & Co. next week. Fitch also revised the outlook to negative from stable. The rating affects $1.4 million of outstanding COs.“The downgrade to BBB reflects the city’s growing debt burden, slow amortization, and thinning financial reserves,” Fitch analysts wrote. “The negative outlook reflects the additional reduction of reserves projected for fiscal 2007 and large future capital needs.”Noting the same growing pains, Standard & Poor’s affirmed Princeton’s BBB rating and maintained a stable outlook. Moody’s Investors Service does not provide an underlying rating on the city.Princeton is experiencing growth in its tax base, but its ability to manage a large capital program will be tested by expansion of its water and sewer program, Fitch analysts wrote.The water and sewer system will support nearly $8.3 million of the city’s debt, and officials increased water and sewer rates by 54% in March 2006 to prepare for the expansion. The rate increase was the first since 1995.With a population estimate of 7,500, Princeton is in central Collin County about 40 miles north of Dallas. Collin County’s 4.3% unemployment in 2006 was slightly lower than the nation’s 4.6% rate.