Aaa RATING AFFECTS $358.6 MILLION IN PARITY DEBT, INCLUDING CURRENT ISSUE
General Obligation Bonds, Series 2011
Expected Sale Date
NEW YORK, Jan 14, 2011 -- Moody's Investors Service has assigned a Aaa rating to the City of Plano (TX)
$21.4 million General Obligation Bonds, Series 2011. At the same time, Moody's
has affirmed the Aaa rating on the city's $337 million in outstanding general
The bonds, which are secured by a limited ad valorem tax pledge, will be used
for various public improvements including streets, parks and a fire station.
Assignment of the high quality Aaa rating reflects an affluent and large tax
base, strong financial management; and a manageable debt burden with annual
plans for debt issuances.
Large and diverse tax base
Strong wealth levels
Healthy General Fund reserve
Recent declines in tax base
Projected gap in revenues and expenditures for 2012
TREND OF AD VALOREM GROWTH REVERSED IN FISCAL 2010
Plano serves as a hub for corporate headquarters and a desirable
residential location in the Dallas-Ft. Worth Metroplex. The city has
historically benefited from rising home values and the stability of the
commercial and corporate base. Population boomed with a 73% increase between the
1990 and 2000 Census years and increased another 20% between the 2000 Census and
the 2011 estimated population of 266,600. Until the recent economic downturn,
values have consistently but moderately improved at a five year average
annual pace of 4% through fiscal 2009. In tax base decreased 1.1% in fiscal 2010
and another 3.2% in fiscal 2011 but remained a sizable $24.6 billion in fiscal
2011. The declines are attributed to general stress on both residential and
commercial values and is modest in comparison to other markets in the U.S.
The city's October 2010 unemployment rate of 7% in lower than the 7.9% rate for
the State and the 9% rate for the US. Among the city's largest taxpayers and
major employers are the headquarters for Electronic Data Systems and J.C.
Penney. About 35% of the total available land remains undeveloped, with the
majority zoned for commercial and industrial purposes. Of the land zoned for
residential use, about 90% has already been developed. Resident wealth
indicators remain strong, with the $36,514 per capita income equal to 186% of
the State and 169% of the US. Going forward, Moody's believes the city should
continue to benefit from a healthy balance between commercial and residential
taxpayers and evidence of new economic development could offset declines on
existing properties to result in at least flat valuations for the near term.
CONSERVATIVE FINANCIAL MANAGEMENT MAINTAINS HEALTHY GENERAL GUND RESERVE
A key factor in Plano's prime credit rating is the quality of its
financial management, including comprehensive fiscal planning and reporting. The
city has a long-standing practice of maintaining budget contingency plans to
address sudden drops in revenue, which have been useful as the economic slowdown
affects revenues such as sales taxes. Management usually estimates revenues and
expenditures conservatively, upholding the ending balance above the city's
policy of maintaining reserves equivalent to 30 days of operating expenditures.
The original fiscal 2010 budget included a $10 million draw down on the General
Fund balance; however, with conservative expenditure spending and better than
expected revenues, the actual deficit was $1.3 million. Over the last three
fiscal years (2009-2011), the city has eliminated 129 full time positions and 17
part time positions demonstrating an ability and willingness to close budget
gaps as necessary.
The $34.4 million unreserved General Fund balance in fiscal 2010 was a healthy
16.6% of General Fund revenues and consistent with prior year reserve levels. In
2010, property taxes generated 40% of General Fund revenues while 29% were
derived from sales tax revenues. Sales tax collections in fiscal 2010
totaled $58 million which exceeded the budgeted amount.
Management conservatively budgeted for $57 million in sales taxes for
fiscal 2011 and anything collected over this amount will be used for one
time capital expenditures. Year-to-date sales tax revenues are $800,000 over the
prior year-to-date. For the 2012 budget, a $16 million gap between revenues
and expenditure has narrowed to a $10 million gap which is currently being
reviewed and evaluated by a budget committee to prioritize services and develop
the budget going forward. Moody's believes city management will continue to
maintain adequate reserve levels and implement the necessary measures to retain
structural balance reflecting the highest quality Aaa rating.
BELOW-AVERAGE DEBT LEVELS, WITH MANAGEABLE FUTURE BORROWING PLANS
The city's debt levels relative to total assessed value remain modest with a
direct debt burden of 1.4%, which considers $3.8 million in self-supported debt
by the water and sewer system. An overall debt burden of 6.0% reflects growth in
overlapping school districts. There is no variable rate debt outstanding and no
derivative products in use. Debt payout is rapid with 70.4% of outstanding
principal to be retired over the next ten years. In May 2009 city voters
approved $132 million in new bond authorization for street improvements,
park development, new fire facilities, and existing facility renovations. After
this issue, the city will have a total of $138.8 million in voter authorized but
unissued debt remaining including authorizations from prior elections. Officials
indicate the city plans to issue approximately $30 million annually without
significant increases to the debt service tax rate.
WHAT COULD MAKE THE RATING GO DOWN
Significant decreases in General Fund balance
Trend of substantial declines in tax base
Estimated population: 266,600
FY 2011 Full value: $24.6 billion
Full value per capita: $93,595
Direct debt burden: 1.4%
Overall debt burden: 6.0%
Principal payout in 10 years: 70.4%
FY 2010 General fund balance: $41.4 million (20% of General Fund revenues)
FY 2010 Unreserved, undesignated general fund balance: $34.4 million (16.6% of
General Fund revenues)
The principal methodology used in this rating was General Obligation
Bonds Issued by U.S. Local Governments published in October 2009.
Information sources used to prepare the credit rating are the following: parties
involved in the ratings and public information.
Moody's Investors Service considers the quality of information available on the
credit satisfactory for the purposes of assigning a credit 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.
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Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S ASSIGNS Aaa RATING TO THE CITY OF PLANO'S $21.4 MILLION GENERAL OBLIGATION BONDS, SERIES 2011
Moody's Investors Service
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