NEW YORK - Standard & Poor's Ratings Services said it raised its underlying rating (SPUR) on Trail of the Lakes Municipal Utility District (MUD), Texas to BBB from BBB-minus based on the district's steady property tax base growth.
At the same time, Standard & Poor's assigned its BBB standard long-term rating to the district's series 2008 unlimited-tax general obligation (GO) refunding bonds. The outlook is stable.
The ratings reflect the district's high overall net debt burden with additional capital needs that will require long-term financing; and modest, primarily residential property tax base, exhibiting manageable growth levels.
These factors are offset, in part, by the district's participation in the deep, diverse Houston metropolitan statistical area and adequate financial position and the flexibility to enhance its operational revenue stream with sufficient taxing flexibility.
An unlimited ad valorem tax on all taxable property within the district secures the bonds. Officials will use bond proceeds to refund a portion of the district's debt outstanding for savings.
"We believe that the district's additional capital requirements will be manageable and that management will only implement further debt plans associated with developing unimproved acreage once sufficient property tax base growth has occurred, which will not have a materially adverse effect on the MUD's debt ratios," said Standard & Poor's credit analyst Brian Marshall "In addition, solid service fee and property tax collection rates should allow MUD management to maintain its adequate financial position," he added.
The MUD's financial position remains adequate. The unreserved general fund balance was $549,000, or 42% of operating expenditures, at fiscal year-end 2007 after a $2,397 general fund drawdown. Management projects ending fiscal 2008 with an unreserved general fund balance of $618,000, or 47% of operations.
The fiscal year-end 2007 debt service fund balance was $2.1 million, or about 120% of maximum annual debt service. The MUD's fiscal 2008 property tax rate is down by five cents from fiscal 2006 but remains a high 75 cents per $100 of assessed value.
District officials have historically dedicated the levy for debt service. The MUD has the legal authority to levy an ad valorem tax to fund operations; officials, however, will not seek the electorate's approval to do so at this time.
Including all overlapping jurisdictions, the total tax rate is elevated at roughly $3.2; management attributes about half this to Humble Independent School District. Water and sewer (70%) and garbage collection (14%) service fees account for most of the MUD's general fund revenues. Service fee and property tax collection rates remain solid.
