City's bond ratings affirmed by Fitch and Moody's; maintains stable outlook
The City received positive ratings from Moody’s Investor Services and Fitch Ratings, Inc. for its 2017 bond issuances. The Permanent Improvement and Refunding Bonds Series 2017 for $54.9 million and the Certificates of Obligation Series 2017 for $5.8 million for were assigned a rating of “AA” by Fitch and ‘Aa2’ by Moody’s. The Water and Sewer System Revenue and Refunding Bonds-Series 2017C for $60.4 million were assigned ‘AA-’ by Fitch and ‘Aa3’ by Moody’s. These ratings demonstrate strong creditworthiness relative to other U.S. municipal or tax-exempt issuers or issues.
“Fitch and Moody’s continue to see the City of Pearland as a thriving and growing municipality. The residents of our City are the main benefactors of our strong financial state as we can continue to make the needed investments, provide services that are impactful and financially solid,” said Mayor Tom Reid.
The credit rating review reflects the City’s sound financial management practices and decisions and is an indication to the taxpayer of the City’s commitment in ensuring long-term financial health of the City. A bond rating, similar to a person’s credit score, represents the credit worthiness of the city’s bonds to potential investors based on economic base, financial indicators, outstanding debt and financial management policies and practices.
In their report, Moody’s ratings highlighted the City’s “growing tax base that benefits from expanding petrochemical activity in the Brazoria County area, strong wealth indicators and stable healthy reserves. Additional considerations include an elevated debt burden and low pension profile.” Moody’s Aa3 rating also praised the City’s “recently improved debt service coverage levels and adequate legal provisions.”
Fitch’s ratings show that the city should “maintain healthy financial flexibility throughout the economic cycle due to its strong revenue-raising ability and ample fiscal cushion despite an elevated fixed cost burden.” Fitch’s ratings also praised the City’s “commitment to supporting financial flexibility, and Fitch expects that such practices would continue throughout the economic cycle.” Both institutions rated the City’s outlook as “stable.”
Proceeds from the Permanent Improvement and Refunding Bonds Series 2017 and the Certificates of Obligation Series 2017 will be will be used to fund various city-wide capital improvements, to refund certain outstanding maturities for debt service savings, and to pay related issuance costs. The refunding portion of the series will provide a savings of $5.2 million with “All Cost” True Interest Rates of 3.26 percent and 3.284 percent for the $38.8 million refunding portion and $24.2 New Money portion respectively over the course of 20 year life of the bonds. Proceeds from the Water and Sewer System Revenue and Refunding Bonds-Series 2017C will pay for waterworks and sanitary sewer system improvements, refund portions of the system's outstanding debt and to pay the costs of issuance. The series will afford $10.7 million of interest savings, with estimated “All Cost” True Interest Rates of 2.9 percent and 3.2 percent for the $53 million refunding portion and $16.9 million New Money portion respectively over the course of 30 year life of the bonds.
For more information on the City’s finances, visit pearlandtx.gov/financialtransparency.
Visit our Capital Improvement Projects page to view more projects funded by these bonds.