Fitch Reaffirms City of Carrollton ‘AAA’ Revenue Bond Rating
Fitch Ratings Inc. has reaffirmed its “AAA” rating to the City of Carrollton for more than $11.9 million in waterworks and sewer system revenue refunding bonds, series 2012 and 2019. The rating outlook is Stable.
According to the Fitch report, contributing factors in receiving the “AAA” score include Carrollton’s exceptionally strong financial performance and planning, low risk capital plan focusing primarily on renewal and replacement, affordable user rates, and a stable, mature economy with above-average wealth levels, and average growth and unemployment.
“Fitch’s review was very thorough, given the current situation with COVID-19 and the resulting impact on the economy, and I am pleased to report Fitch confirmed our AAA-Stable rating,” Assistant City Manager for Finance Bob Scott said. “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 36,000 residential and commercial customers. The City does not own any treatment facilities, purchasing treated water on a wholesale basis from Dallas Water Utilities (DWU) and wastewater treatment services from Trinity River Authority (TRA).
“The financial profile is exceptionally strong and assessed at a ‘AAA’ rating,” the report states. “At the close of fiscal year 2019, the system’s days cash on hand and the liquidity cushion ratio both equaled 236 days. For the same period, coverage of full obligations was 1.2x; Fitch-calculated debt service coverage for the period was 2.6x.”
The system has some of the lowest rates in the region according to the report, and as of fiscal year 2019, rate flexibility is very strong. The combined monthly utility bill of approximately $60 (using Fitch’s standard usage of 7,500 gallons of water and 6,000 gallons of sewer flow per month) is considered to be affordable for the vast majority of customers (almost 92 percent). The City suspended rate increases for fiscal year 2021 but expects to resume increases in fiscal years 2022 and 2023, and the system plans to fund its capital spending from Pay As You Go funding.
“Strong financial management, robust forecasting, and frequent budget monitoring practices are the underpinning of an efficient, successfully-run City like Carrollton,” Mayor Kevin Falconer said. “The City Council regularly reviews rolling capital improvement plans, budgetary status reports, and quarterly investment reports supplied by City management. These practices, along with strong financial leadership and fiscally responsible budgeting, allow us to weather storms such as the pandemic we are in today and ensure the City of Carrollton is primed for future growth.”
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, visit cityofcarrollton.com/finance.