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Rating Action:

Moody's assigns Aa1 to City of Frisco's (TX) $143M GO Bonds; outlook is stable

Global Credit Research - 17 Jul 2014

Affirms Aa1 on $662.1M rated debt including current offering

New York, July 17, 2014 --

Moody's Rating

Issue: Combination Tax and Limited Surplus Revenue Certificates of Obligation, Taxable Series 2014A; Rating: Aa1; Sale Amount: $90,000,000; Expected Sale Date: 7/30/2014; Rating Description: General Obligation Limited Tax

Issue: Combination Tax and Revenue Certificates of Obligation, Series 2014; Rating: Aa1; Sale Amount: $13,100,000; Expected Sale Date: 7/30/2014; Rating Description: General Obligation Limited Tax

Issue: General Obligation Refunding and Improvement Bonds, Series 2014; Rating: Aa1; Sale Amount: $39,975,000; Expected Sale Date: 7/30/2014; Rating Description: General Obligation Limited Tax

Opinion

Moody's Investors Service has assigned a Aa1 rating to the City of Frisco's (TX) $90 million Combination Tax and Limited Surplus Revenue Certificates of Obligation, Taxable Series 2014A, $39.9 million General Obligation Refunding and Improvement Bonds, Series 2014, and $13.1 million Combination Tax and Revenue Certificates of Obligation, Series 2014. Concurrently we have affirmed the Aa1 rating on the city's $537 million of outstanding GOLT bonds. The outlook is stable.

The bonds and certificates of obligation 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 of the surplus net revenues of the city's water and sewer system, not to exceed $1,000. Proceeds from the Series 2014 and 2014A certificates of obligation will fund improvements to the city's water and sewer system and fund construction of a new multi-use sports and event center, respectively. The GO refunding and improvement bonds will fund street improvements and refund certain maturities of the city's outstanding GO bonds for an estimated 6% present value savings.

SUMMARY RATING RATIONALE

The Aa1 rating reflects the city's large and diverse tax base located in the Dallas-Fort Worth metro area and favorable socioeconomic profile characterized by strong resident wealth levels. The rating also incorporates the city's stable financial condition, demonstrated by its strong management team, structurally balanced operations, conservative budgeting, and adherence to formal financial policies. The rating further incorporates the city's elevated direct debt burden, which is partially supported by water and sewer system revenues, and plans for additional near term borrowing.

OUTLOOK

The stable outlook reflects our expectation the city's financial position will remain healthy in the near term because of healthy reserve levels and strong proactive management. The stable outlook also reflects our expectation the tax base will remain stable from ongoing economic development and market value appreciation.

STRENGTHS

-Sizable, growing, and diverse tax base

-Sound reserves, bolstered by strong management and formal policies

-Above average socioeconomic profile

CHALLENGES

-Elevated debt burden with plans for additional near term borrowing

-Potential unanticipated expenses related to the remediation of the Exide property

WHAT COULD MAKE THE RATING GO UP

-Continued tax base expansion

-Maintenance of sound reserve position despite ongoing expenditure growth

-Substantial reduction of debt burden

WHAT COULD MAKE THE RATING GO DOWN

-Tax base contraction

-Trend of operating deficits resulting in deterioration of financial reserves

-Reduction in water and sewer system's support of GO debt

-Unanticipated costs associated with Exide property remediation, resulting in substantial reduction of reserves

The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. 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 certain 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 certain 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 certain 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Nathan Eric Phelps
Analyst
Public Finance Group
Moody's Investors Service, Inc.
600 North Pearl Street
Suite 2165
Dallas, TX 75201
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Lauren E Von Bargen
Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Aa1 to City of Frisco's (TX) $143M GO Bonds; outlook is stable
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