DALLAS - The East Texas town of Longview has earned a one-notch upgrade to AA from Standard & Poor's based on "very strong reserves, coupled with a diversifying and growing tax base."
The upgrade from AA-minus comes ahead of the city's July 23 competitive sale of $11.3 million of general obligation bonds. Southwest Securities is financial adviser on the deal, with McCall Parkhurst & Horton as bond counsel.
Fitch Ratings affirmed its AA-minus rating on the credit. Moody's Investors Service, which upgraded Longview's GO credit to Aa3 in July 2007, had not yet issued its report yesterday.
Analysts at Standard & Poor's noted the stable regional economy with growth in the health care and manufacturing sectors. The government's sound financial performance has provided the city with strong reserves, they said.
"We expect that continued moderate increases in ad valorem and sales tax revenues generated, coupled with the city's sound financial practices, will allow management to maintain a sound financial position with good reserve levels," said credit analyst Kate Choban.
The upcoming bonds are backed by an ad valorem pledge on all taxable property in the city. Bond proceeds will be used to finance road improvements and city hall renovations.
Located 120 miles east of Dallas and 60 miles west of Shreveport, La., Longview is home to nearly 78,000 people and serves as the seat of Gregg County. The city has become a regional shopping hub attracting major big-box retailers.
Much of the city's growth was fueled by the oil and gas industry, but its economy has diversified in the past 10 years. Health care, manufacturing, distribution, and food processing are among some of the major employment sectors. Taxable assessed valuations have been growing modestly averaging an annual growth rate of about 5% from fiscal years 2003-2008, but jumped 15% in fiscal 2009 due to new residential and commercial development.
About half of the tax base is residential and 46% commercial and industrial. Oil and gas reserves accounted for only 2% of taxable assessed value in fiscal 2009, compared with nearly 14% in fiscal 1995.
Fitch analysts noted that their rating reflects the city's "heavy dependence on sales tax receipts, which are vulnerable to fluctuating economic cycles and the somewhat limited local economy."
Sales tax receipts comprise a hefty 37% of general fund revenues. However, sales tax receipts have not contracted despite the economic downturn, analysts noted. City officials report that current year results point to an estimated 5% increase from last year's sales tax receipts.