Pearland Receives Improved Credit Rating
PEARLAND, TEXAS – July 11– Reviews from Moody’s Investor Services and Fitch Ratings, Inc., two nationally recognized credit rating agencies, recently affirmed the City of Pearland as having high-grade credit worthiness for the City’s 2020 bond issuances. The ratings demonstrate very strong credit worthiness relative to other U.S. municipal or tax-exempt issuers or issues.
Moody’s and Fitch measured the City’s General Obligation issuances and scored the city’s credit highly, with an Aa2 rating and AA rating, respectively. The credit report from Moody’s said, “The rating reflects a large and growing tax base with above average income levels and an improving financial position.” Similarly, the Fitch report said the ‘AA’ indicates the City’s superior financial flexibility, supported by strong revenue growth prospects and adequate expenditure flexibility.
The City issues bond financing to fund long-term Capital Improvement projects essential to safety and quality of life in Pearland. As part of that process, the debt receives ratings for credit risk from independent credit rating agencies that affect the City’s interest rate. Generally, a better rating brings a lower interest rate for the City to pay, relative to similar issues on the market at the time. Projects include City facilities, parks, and roads, all of which are planned and detailed in a multi-year capital improvement program.
Rating Outlook and Potential Economic Impacts of COVID-19
Fitch and Moody each reported the City’s rating outlook as stable, with Moody revising upward to stable from negative.
Moody’s outlook revision cites the city’s improved reserve position due to management’s budget management and expense control practices, and reductions to offset expected weaker revenue performance.
Despite economic disruptions due to the COVID-19 pandemic, the City’s affirmed credit rating puts the City in a good financial position going forward.
Moody’s report said, “The city has also been proactive in careful expense management in response to the coronavirus pandemic allowing for a structurally balanced budget to persist during the year.”
Water/Sewer Revenue Bonds Receive Aa3 and AA- Ratings
Both credit rating agencies also rated the City’s Water and Sewer System Revenue Bonds highly. Moody’s assigned an Aa3 rating while Fitch assigned an AA- to the City.
Both ratings reflect the City’s large and growing water/sewer customer base with above average income levels, while considering the system’s high debt load due to an active Capital Improvement Plan to continue to improve the water and sewer system. Water and sewer revenue bonds are repaid exclusively from the water and sewer business that the City operates through rates.