Fitch Reaffirms Carrollton’s ‘AAA’ Bond Rating
Fitch Ratings Inc. has reaffirmed its “AAA” rating to the City of Carrollton for more than $6.7 million in waterworks and sewer system revenue refunding bonds, series 2012. The rating outlook is Stable.
According to the Fitch report, contributing factors in receiving the “AAA” score include Carrollton’s strong financial performance and planning, low debt/modest capital plan, affordable user rates, and a stable, mature economy with high wealth levels and relatively low unemployment.
“They were very thorough and I am pleased to report Fitch confirmed our AAA-Stable rating,” said Bob Scott, Assistant City Manager for Finance. “This is literally as good as it gets rating wise. A “AAA” rating is only possible through a team effort that starts with our elected officials, appointed leadership, and especially Public Works, Engineering, and Utility Customer Service Departments that ensure safe, reliable water is given to our customers.”
The bonds represent senior lien obligations of the City’s combined water and sewer system, payable from net system revenues. Carrollton provides retail water and sewer service to more than 38,000 residential and commercial customers. And because the City does not own any treatment facilities, Carrollton purchases treated water on a wholesale basis from Dallas Water Utilities (DWU) and wastewater treatment services from Trinity River Authority (TRA).
“Financial operations over the past five fiscal years have been characterized by positive margins,” the report states, then describes the City’s financial management as “very strong as evidenced by stringent fiscal policies and conservative budgeting.” The report goes on to say, “Significant leveraging or swift financial decline could pressure the rating, but given the City of Carrollton’s strong financial planning and currently very low debt burden, such a situation is viewed as highly unlikely.”
The City has anticipated modest annual increases in costs from both DWU and TRA and built those forecasted increases into the budget for fiscal 2018.
“Despite the rising wholesale costs, user rates are very affordable,” the report states. “The city council has historically approved rate hikes to ensure financial health and proper system maintenance. The average monthly residential bill totals a relatively modest $56 (based on 8,900 gallons water consumption) and registers at a low 1 percent of [median household income].”
Fitch stated it views Carrollton’s pricing rate structure as a credit positive due to sizable base charges, which account for 37 percent of water charges and 49 percent of sewer charges, providing a good deal of stability in operating revenue.
“Sound financial management is the backbone of an efficient, successfully-run city, like Carrollton. I am proud to work with such a fine group of individuals.” said Mayor Kevin Falconer.
Fitch Ratings is a global leader in financial information services with operations in more than 30 countries. The company provides credit ratings, expert commentary, and market research.
For more information on Carrollton’s fiscal status, click here.