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MOODY'S ASSIGNS Aa1 RATING TO THE CITY OF COPPELL'S (TX) $13.950 MILLION GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2011 AND $8.915 MILLION COMBINATION TAX AND LIMITED SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2011

22 Jul 2011

RATING ASSIGNMENT AND AFFIRMATION AFFECTS $89.3 MILLION IN OUTSTANDING PARITY DEBT, INCLUSIVE OF CURRENT ISSUES

Municipality
TX

Moody's Rating

ISSUE

RATING

General Obligation Refunding and Improvement Bonds, Series 2011

Aa1

  Sale Amount

$13,950,000

  Expected Sale Date

07/25/11

  Rating Description

General Obligation Limited Tax

 

Combination Tax and Limited Surplus Revenue Certificates of Obligation, Series 2011

Aa1

  Sale Amount

$8,915,000

  Expected Sale Date

07/25/11

  Rating Description

General Obligation Limited Tax

 

Opinion

NEW YORK, Jul 22, 2011 -- Moody's Investors Service has assigned a Aa1 underlying rating to the City of Coppell's (TX) $13.950 million General Obligation Refunding and Improvement Bonds, Series 2011, and $8.915 million Combination Tax and Limited Surplus Revenue Certificates of Obligation, Series 2011. Proceeds from the sale of the bonds will be used to refund certain maturities of the city's outstanding Series 2002 and 2003 bonds for an expected net present value savings of 5% with no extension of final maturity, and construct and improve various streets and roads within the city. Proceeds from the sale of the certificates will be used to also construct various streets and roads, and make improvements to the Old Town Coppell public area.

SUMMARY RATINGS RATIONALE - UNDERLYING

The bonds and certificates are secured by an annual ad valorem tax levied against all taxable property in the city within the limits prescribed by law. The certificates are additionally secured by a limited pledge (not to exceed $1,000) of the surplus revenues of the City's Waterworks and Sewer System. The rating assignment and affirmation reflect the strong underlying credit quality of the city including a moderately sized tax base located favorably within the Dallas Fort Worth (DFW) metropolitan area with easy access to the DFW International Airport, a history of strong financial performance that have yielded ample reserves providing against any financial uncertainties, strong socio economic indices comparable to the medians for the rating category, and a debt portfolio that includes affordable debt burdens, that are somewhat high for the rating category.

STRENGTHS

History of strong financial performance marked by ample reserves

Strong socio-economic indices

Moderately sized tax base that experienced flat growth despite challenges in the national economy

WEAKNESSES

Above median debt burdens

DETAILED CREDIT DISCUSSION

HISTORICALLY STRONG FINANCIAL PERFORMANCE YIELDS AMPLE RESERVES; MINIMAL OPEB UNFUNDED LIABILITY

Moody's believes the city has demonstrated a trend of solid financial management evident by the ample reserves in the General Fund in excess of the city's combined charter and reserve policy, which Moody's notes is a strength. The city's charter calls for a reserve requirement equal to 10% of next year's budget. On top of the charter, the city has created a General Fund policy that calls for a minimum of 60 days in expenditures. Over the past four years, the General Fund balance has yielded a consistent trend of operating surpluses totaling over $20 million on the aggregate level. During the same time period, the total General Fund balance grew to $39.6 million (82.6% of General Fund revenues) in fiscal year 2010 from $22.8 million (50.7% of General Fund revenues) in fiscal year 2007. At fiscal year end 2010, of the total $39 million, the unreserved undesignated portion of the balance was $17.9 million (37.3% of General Fund revenues). However, Moody's notes that a approximately $11 million of the reserved and designated portions ($4.4 million reserved for contingencies, and $6.6 million reserved for the fiscal year 2011 budgeted expenditures) satisfies the city's charter for reserves, and reserve policy. As such, the total available General Fund balance was $28.9 million (60.1% of General Fund revenues) at the end of the fiscal year. In fiscal year 2011, officials indicate the budget is faring better than original assumptions as preliminary numbers indicate a subsequent operating surplus of $985,000 which will improve the total General Fund balance to $40.6 million (an ample 84.7% of 2010 General Fund revenues). The available fund balance, including the portions that satisfy the charter and reserve policy, will equal $30.7 million (64% of 2010 General Fund revenues), also based on initial projections. In anticipation of fiscal year 2012, officials expect a balance budget with no plans to draw on reserves given no pressing need. The city remains a participant in the Texas Municipal Retirement System, a statewide pension system. In fiscal year 2010, the annual required contribution was $3.6 million or 7.6% of General Fund revenues. The city has historically made 100% of its annual required contribution (ARC) and it is expected this practice will continue over the long term. The city also offers Other Post Employment Benefits (OPEB) to its employees. The city currently funds this obligation on a pay as you go basis. At fiscal year end 2010, the city recorded a minimal liability of $1.4 million, all of which was funded. The ARC for OPEB in fiscal year 2010 was $205,268 or 0.5% of General Fund revenues. Had the city made 100% of its contribution, the General Fund would have still yielded an operating surplus over $3 million.

The city received majority of its fiscal year 2010 revenues from three sources: taxes, penalties and interest (75.5%), charges for services (9.1%), and transfers in (7.2%) which are formula driven for administrative costs associated with the utility system, and franchise fees. In fiscal year 2010, the city levied a total of $6.91 per $1,000 of assessed values with $4.96 allocated to maintenance and operations, and $1.95 allocated to debt service. With the total levy, the city remains well below the state maximum of $25 per $1,000 of assessed values. Including the sale, officials expect a slight increase in the debt service levy in fiscal year 2013.

FAVORABLY LOCATED IN THE DALLAS FORT WORTH METROPOLITAN AREA IN CLOSE PROXIMITY TO THE DFW INTERNATIONAL AIRPORT

Located in Dallas County (Aaa/stable outlook), Coppell is approximately 18 miles from downtown Dallas (Aa1/stable outlook), 24 miles from Fort Worth (Aa1/stable outlook), and 20 miles from Denton (Aa2/NOO). Traditionally a bedroom community, the city has experienced considerable commercial activity in its eastern portion that has helped diversify the base. Currently, single family residences account for approximately 57.7% of the total base, while real commercial accounts for 18.7%, and tangible commercial accounts for 13.6%. Officials note the city is built out from a residential perspective, but has between 600 - 700 acres of land available for commercial development. Officials anticipate that ongoing development will improve the diversity of the base to a makeup that is 50% commercial, and 50% residential in the intermediate term. Over the past five years, taxable values within the city grew an annual average of 3.7% with the growth pace moderating in the past couple of years. In fiscal years 2011, taxable values declined a slight 0.1% to $4.8 million, following modest growth of 0.6% noted in fiscal year 2010. The top ten taxpayers reflect moderate concentration, accounting for 8% of fiscal year 2011 taxable values. Preliminary numbers from received about two weeks ago from the appraisal district indicate growth of 1.9% for fiscal year 2012, although officials will budget for flat growth. Despite the historical growth and somewhat recent commercial development, Moody's notes that the city tax base remains comparable to similarly rated credits, a key driver of the affirmation. Over the long term, we believe the city's potential for commercial activity given the moderate availability of land, and its close proximity to the DFW International airport that is well suited to serve the business needs of companies will yield growth in taxable values.

While the socio-economic indicators within the city remain high, they are comparable to similarly rated credits, another key driver for the affirmation. The 1999 per capita income was $40,219 which was 205% of the sate, and 186.3% of the nation, while the 1999 median family income was $106,630, which was 232.5% of the state, and 213.1% of the nation, as reported by the 2000 U.S. Census. The April 2011 unemployment rate within Dallas county was 8.1%, which was slightly higher than the state's 7.7%, and lower than the nation's 8.7%.

SLIGHTLY ELEVATED DEBT BURDENS

All of the city's debt is fixed rate and the city is not party to any derivative agreements. Including the sale, the city's debt burdens are above the medians for the rating category with a direct debt burden of 1.8% (5.3% overall). Payout is average with 68.1% of principal retired in 10 years. Following this issuance, the city has $1.9 million in authorized but unissued debt. However, officials express a possibly issuance totaling $9 million in fiscal year 2012 to support progressing commercial development. Moody's believes commercial development may increase debt needs in the near term. However, we expect the city's debt burden will remain manageable over the intermediate to long term.

WHAT COULD MOVE THE RATING UP

Continued economic activity significantly increasing taxable values

Continued solid financial performance

WHAT COULD MOVE THE RATING DOWN

Erosion of current available reserves

Subsequent and significant taxable value decline

KEY STATISTICS:

2011 Full Valuation: $4.8 billion

2011 Full Value Per Capita: $121,709

1999 Per Capita Income (as % of TX and US): $40,219 (205% and 186.3%)

1999 Median Family Income (as % of TX and US): $106,630 (232.5% and 213.1%)

Direct Debt Burden: 1.8%

Overall Debt Burden: 5.3%

Payout of principal: 68.1%

2010 General Fund balance: $39.6 million (82.6% of General Fund revenues)

General Obligation Limited Tax (GOLT) Debt Outstanding: $89.3 Million

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology .

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, [and] parties not involved in the ratings, [and] public information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Adebola Kushimo
Analyst
Public Finance Group
Moody's Investors Service

Kristin Button
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS Aa1 RATING TO THE CITY OF COPPELL'S (TX) $13.950 MILLION GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2011 AND $8.915 MILLION COMBINATION TAX AND LIMITED SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2011
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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