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MOODY'S ASSIGNS Aa3 RATING TO THE CITY OF HALTOM CITY'S (TX) $2.3 MILLION COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2011

16 Aug 2011

RATING ASSIGNMENT AND AFFIRMATION AFFECTS $59.2 MILLION IN OUTSTANDING PARITY DEBT, INCLUSIVE OF THE CURRENT SALE

Municipality
TX

Moody's Rating

ISSUE

RATING

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

Aa3

  Sale Amount

$2,345,000

  Expected Sale Date

08/29/11

  Rating Description

General Obligation Limited Tax

 

Opinion

NEW YORK, Aug 16, 2011 -- Moody's Investors Service has assigned a Aa3 underlying rating to the City of Haltom City's (TX) $2.3 million Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2011. Concurrently, we have affirmed the Aa3 on the city's outstanding parity debt affecting $56.8 million. Proceeds from the sale of the certificates will be used to make various public improvements throughout the city.

SUMMARY RATINGS RATIONALE

The certificates are secured by an annual ad valorem tax, levied on all taxable property within the city, within the limits prescribed by law. The certificates are additionally secured by a limited tax pledge on the net revenues derived from the operation of the city's combined utility system in an amount not to exceed $1,000. The rating assignment and affirmation reflects the city's moderately sized base located favorably in the Dallas/Fort Worth metropolitan area, a history of strong financial management marked by healthy reserves and manageable debt burden.

STRENGTHS

Favorable location in the Dallas/Fort Worth metropolitan area

Sound financial management marked by healthy reserves

CHALLENGES

Recent decreases in assessed valuations

Higher direct debt burden than rating median with future debt plans

DETAILED CREDIT DISCUSSION

FAVORABLE LOCATION CLOSE TO FORT WORTH; FUTURE INTERSTATE EXPANSION COULD SPUR FUTURE ECONOMIC DEVELOPMENT

The City of Haltom City is located four miles northeast of the City of Fort Worth (Aa1/Stable) which provides close proximity to major employment centers. As a mature community, officials estimate that the city is approximately 80% built-out. The largest taxpayers are not concentrated comprising 10% of total taxable values in fiscal year 2011. The city is bisected by Highways 121, 183, and 377 and Interstate 820. A large area of 820, within the city limits, has not been developed, given limited access on and off the interstate. A state project is underway that will expand I-820, by 2015, turning it into the North Tarrant Express and the city's economic development corporation is focused on developing back roads to provide access to the lots in order to spur future commercial and industrial development.

Between the 2005 and 2009 fiscal years, the city's tax base experienced steady growth averaging 4.6% annually. A modest increase of 0.7% in fiscal 2010 resulted in a $1.7 billion tax base. However, the 9% decrease in fiscal 2011 subsequently decreased the tax base to $1.5 billion. Despite $1.4 million in new construction for fiscal 2011, a 7.1% decrease in residential values and a 13% decrease in commercial/industrial values resulted in the overall decrease. Taxable values appear to be stabilizing as preliminary values for fiscal year 2012 indicate an increase of 0.5%, revised from a prior expectation of a 2.5% - 3.1% decline. The city socioeconomic profile is somewhat modest with a per capita income of $17,740 which was equal to 90.4% of the state and 82.2% of the US. Moody's believes that despite recent tax base declines, the size of the base remains consistent with the current rating.

HEALTHY RESERVES WITH ADOPTED GENERAL FUND BALANCE POLICY

The city has a formally adopted policy (by resolution in 2003) to maintain 20% of expenditures in the General Fund reserve. Moody's recognizes this policy is strong and is a favorable credit factor. The city consistently meets or exceeds this policy reflected in solid General Fund reserves, and there are currently no plans to reduce reserves. In fiscal 2010, the General Fund balance totaled $6.6 million, or 33.4% of General Fund revenues. Projections for fiscal 2011 indicate that the fund balance could increase by $103,000 to $6.7 million, revised from a prior expectation of $6.9 million due to the trend of sales tax collections. Property taxes comprise about one-third - 32.8% of General Fund revenues and 22.9% of revenues is derived from sales taxes. Officials reported that sales tax revenues are 2.1% ahead of the revenue projections for fiscal year 2011 as of July, moderated from the 7.1% reported in February. Expenditure cuts have been made across-the-board although no significant cuts have been necessary to-date. Moody's believes the city maintains healthy reserves which are consistent with the current rating.

DEBT BURDENS MANAGEABLE

The direct debt burden is 2.7% (excluding water and sewer self supporting debt) and the overall debt burden of 6.5% is higher primarily due to overlapping debt of local school districts. Following this issuance, the city has approximately $13.8 million in authorized but unissued debt. Additional general obligation bond issuances are planned through 2020 but are not expected to exceed $3 million annually. With future debt plans, the debt burden could increase if assessed valuations continue to decline or flatten. However, with a long term capital plan and conservative management, we believe the debt burdens will remain manageable. The city does not have any variable rate debt and is not party to any swap agreements.

WHAT COULD MAKE THE RATING GO UP

Significant increases in assessed valuations

Improvement in socioeconomic profile relative to the State and US

WHAT COULD MAKE THE RATING GO DOWN

Ongoing trend of significant decreases to assessed valuations

Decreases in General Fund balance to a level inconsistent with the rating

KEY STATISTICS:

Preliminary 2012 Full valuation: $1.6 billion

2000 Population: 39,018

2012 Full value per capita: $36,570

2000 Per Capita Income: $17,740 (82.2% of US)

2000 Median Family Income: $42,706 (85.3% of US)

Direct debt burden: 2.7%

Overall debt burden: 6.5%

Payout (10 years): 62.8%

2010 General Fund balance: $6.7 million (33.4% of General Fund revenues)

Outstanding parity debt: $59.2 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, 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 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

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

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

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.
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MOODY'S ASSIGNS Aa3 RATING TO THE CITY OF HALTOM CITY'S (TX) $2.3 MILLION COMBINATION TAX AND LIMITED PLEDGE 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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