DALLAS — Continuing a trend, Standard & Poor’s upgraded the underlying credit of three more Texas communities this week.
A report issued by the agency about two weeks ago showed 96% of rating changes nationally during the second quarter were upgrades. In addition, the strong Texas economy and continued development of the Barnett Shale remain a boon for Lone Star state issuers.
The Barnett Shale is one of the largest natural gas reserves in the U.S. and has fed the North Texas economy for the past few years. A report from the Perryman Group in April estimated 2007 production from the Barnett Shale pumped $387.7 million in direct and indirect taxes into the coffers of 18 Texas counties.
This week, Standard & Poor’s raised the general obligation credit of the small but growing rural North Texas towns of Melissa and Mineral Wells, as well as Parker County.
About 35 miles north of Dallas, Melissa plans to issue $5.2 million of GOs and $2.2 million of certificates of obligation this week through a negotiated sale led by SAMCO Capital Markets Inc.
Standard & Poor’s raised the town’s rating to A from BBB-minus, citing an “improving and much stronger financial position.”
Officials plan to use proceeds from this week’s GO sale for street improvements. Following the sale, Melissa will have about $13.9 million of unissued debt remaining from a $19.1 million bond package passed in November.
The town’s population has more than doubled the past five years to about 4,300, while the taxable-assessed value increased 128% to $297.1 million from $130.3 million in 2004.
Analysts said the town’s “very strong income and wealth levels,” and inclusion in the expanding and strong Dallas-Fort Worth economy and labor market, also factored in the upgrade.
Moody’s Investors Service upgraded its rating on Melissa’s GO debt to Baa1 from Baa2 ahead of the issue, citing the expanding tax base. The city’s high debt burden and significant capital needs are also factored in the higher rating, which applies to about $7.1 million of debt outstanding.
Just west of Tarrant County and Fort Worth, Parker County had its underlying credit raised to AA-minus from A-plus due to continued expansion and diversification of its economy and a good financial performance.
Analysts said the county is experiencing high residential development because of its access to employment opportunities in Fort Worth, direct transportation access via Interstate 20, and the availability of land, predominantly in unincorporated areas.
Development of a 7,300-acre, master-planned community that is located right near the convergence of Interstate 20 and Interstate 30 is projected to add another 40,000 residents by 2015. The county’s population of about 108,000 is up 22% from the 2000 Census tally of 88,495.
A little further west, Mineral Wells had its GO credit bumped up two notches to A-plus from A-minus based on continued expansion and strong reserves. Analysts said the city incurred a $1.1 million surplus for fiscal 2007, pushing the fund balance to $4.4 million, or a strong 54% of expenditures, and attributed that to conservative budgeting practices.
City manager Lance Howerton said the city doesn’t have any plans to issue debt and tries to use pay-as-you-go financing for most capital projects. Officials expect to draw down about $1.7 million from the reserve for one-time capital expenditures this year, according to analysts.
Mineral Wells is home to about 17,000 residents and the largest city in Palo Pinto County.
Howerton said new development continues.
“We’ve been able to lure a pretty substantial industrial base here over time,” he said. “And we’re the next tier of development coming out of Tarrant County and the Barnett Shale have all contributed to the growth.”
Fitch Ratings rates Mineral Wells’ debt outstanding at A.