DALLAS – Multiple-tranche deals from El Paso and Arlington lead the way this week in Texas.

In the largest deal of the week, El Paso plans to issue three series of general obligation debt worth $78.6 million through negotiation with Merrill Lynch as lead manager. Morgan Stanley and Southwest Securities Inc. are co-managers.

First Southwest Co. is the city’s financial adviser and Fulbright & Jaworski LLP is bond counsel.

The West Texas border town will offer $28.1 million of Series 2009A combination tax and revenue certificates of obligation, $46.7 million of Series 2009B taxable certificates of obligation, and t $3.2 million of Series 2009C taxable certificates of obligation.

The tax-exempt COs will feature serials maturing in 2012 through 2019.

The Series 2009B COs will be issued as Build America Bonds and officials will take advantage of the direct-pay subsidy. Issuers of BABs, which were introduced earlier this year as part of the federal stimulus package, receive a 35% subsidy from the Treasury Department on their interest costs. The bonds will be serials maturing in 2020 through 2034.

The 2009C COs are structured as recovery zone economic development bonds with a single term bond maturing in 2034. The city will get a 45% interest subsidy from the federal government for these bonds.

El Paso’s general obligation debt carries underlying ratings of AA-minus from Fitch Ratings, AA from Standard & Poor’s, and Aa3 from Moody’s Investors Service.

Moody’s affirmed the rating on $218 million in outstanding debt and said the rating also takes into account $565 million of GO debt the city has out that isn’t rated by the agency. Analysts said the rating reflects El Paso’s “sizeable and moderately expanding tax base, narrowing fund balance mitigated by active management, and elevated debt burdens.”

The city’s fiscal 2010 tax base rose 2.8% from a year earlier to $29.6 billion. The growth “represents a notable deceleration” from average annual gains of 8.4% the past few years, according to analysts.

Moody’s also expects the influx of new troops expected to come to Fort Bliss as part of the federal government’s base realignment and closure initiative “will strengthen the local economy over the near to medium term.”

The El Paso County Hospital District plans to offer about $24.8 million of refunding bonds this week in a negotiated sale led by Merrill Lynch.

Kaufman Hall is the financial adviser to the district, which carries underlying ratings of AA-minus from both Fitch and Standard & Poor’s.

In the competitive market Tuesday, Arlington plans to offer $29.4 million of permanent improvement and refunding bonds, about $6.9 million of Series 2009A combination tax and revenue certificates of obligation, and $2.1 million of Series 2009B combination tax and revenue certificates of obligation.

Estrada Hinojosa & Co. is the financial adviser to the city, which is between Dallas and Fort Worth. Vinson & Elkins LLP is bond counsel.

The bonds are structured as serials maturing in 2012 through 2029 and both tranches of COs mature in 2010 through 2016.

Fitch s assigned a AA rating to the sale, citing the diverse local and regional economies, as well as the city’s “healthy operating reserve levels despite recent sales-tax revenue declines,” moderate debt, and sound management practices.

Standard & Poor’s assigned a AA-plus rating to the debt. Analysts said Arlington’s taxable-assessed value averaged 3.4% annual growth through fiscal 2009, but a decline in property valuations led to a 0.4% decline to $18.2 billion for fiscal 2010.

The West Harris County Regional Water Authority is bringing $63.7 million of water system revenue bonds to market at some point this week. Morgan Keegan leads the underwriting syndicate for the negotiated sale.

RBC Capital Markets and First Southwest are co-financial advisers to the Houston-area issuer. Allen Boone Humphries Robinson LLP is bond counsel.

Proceeds from the bonds, which are structured as serials maturing in 2012 through 2035, will fund upgrades and extensions to transmission lines, pumping, storage, and water-well facilities.

Standard & Poor’s assigned an A rating to the issue and Fitch assigned an A-minus.

Analysts said the rating reflects the authority’s “sufficient financial and operating history, buoyed by management’s willingness to adjust rates as necessary.”

Formed in 2001, the authority oversees a 226-square-mile area that provides surface water to more than 100 retail water systems, mostly small suburban utility districts. The service area’s current population is more than 300,000 and projections show a population of nearly 350,000 by next year.

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