Moody's Investors Service said it has upgraded the city of Waco, Texas's general obligation limited tax debt to Aa1 from Aa2, impacting $355.2 million in previously issued bonds.
Concurrently, Moody's said it has assigned a Aa1 to Waco's $33.6 million combination tax and revenue certificates of obligation, Series 2017. The outlook is stable.
The upgrade to Aa1 reflects an expanding economy supporting solid gains in assessed values, and a consistent history of strong operating performance, Moody's said.
Additional considerations include an economy that benefits from institutional presence, driving unusually weak wealth indices, and an elevated debt profile with high support from utility system revenues. The Aa1 GOLT rating is rated the same as the Moody's internal assessment of the issuer's hypothetical general obligation unlimited tax (GOULT) debt, reflecting the city's ample taxing headroom which offsets the limitation under the property tax caps, lack of full faith and credit pledge, and inability to override the statutory tax cap.
The stable outlook reflects the city's size and regional importance which should sustain stable economic and financial trends.
Factors that Could Lead to an Upgrade
- Continued economic gains leading to significant growth in assessed values
- Substantially improved socioeconomic indicators
- Consistent financial performance that surpasses peers
Factors that Could Lead to a Downgrade
- Erosion of available financial resources
- Failure of utility net revenues to cover utility related general obligation debt, substantially pressuring operations
