The East Texas city of Tyler took the rare step of paying off its last general obligation debt and earned an upgrade from Standard & Poor’s to AA from AA-minus.
The city of 106,000, known as the Rose Capital of Texas, is rated Aa3 by Moody’s Investors Service and AA by Fitch Ratings.
Mayor Joey Seeber joined other city officials in signing the last $3 million check in a ceremony at the Tyler Pounds Regional Airport last month. The bonds were paid off through a half-cent sales tax approved by voters in 1995.
City manager Bob Turner noted that Tyler made three promises when it sought voter approval for the debt: that the GO debt would be eventually eliminated; that property taxes would then be reduced by 15%; and that the city would pay cash for capital improvements.
“Each of these promises has been kept,” he said.
The city is not debt-free. In fact, a few days after the payoff of the GOs, the City Council unanimously approved the sale of $5 million of utility revenue bonds for water and sewer projects, with plans to issue $20 million more in coming years. But those bonds are backed by revenues from water and sewer customers.
Still, the upgrade from Standard & Poor’s is expected to save the city nearly $80,000 on the $5 million bond issue and hundreds of thousands more on future utility bonds, Turner said.
“The low interest rate currently available makes this a very strategic time to invest in Tyler’s future,” Turner said. “We are capitalizing on our high bond rating and seizing this opportunity to position Tyler for anticipated growth and development.”