KBRA Assigns AA+ Rating to City of Pflugerville, TX Combination Tax and Limited Revenue Certificates of Obligation, Series 2023A and Limited Tax Bonds, Series 2023; Affirms Ratings for Outstanding Bonds
19 Jul 2023 | New York
KBRA assigns a long-term rating of AA+ to the City of Pflugerville, Texas (Travis and Williamson Counties, Texas) Combination Tax and Limited Revenue Certificates of Obligation, Series 2023A and Limited Tax Bonds, Series 2023. KBRA simultaneously affirms the long-term rating of AA+ for the City’s outstanding Combination Tax and Limited Revenue Certificates of Obligation and Limited Tax Bonds. The Outlook for each obligation is Stable.
KBRA’s Stable Outlook reflects the expectation that Pflugerville will maintain its strong reserve and liquidity levels, and that management will be able to adequately adjust governmental spending should the pace of development moderate – and the associated rate of tax and resource base growth realized in recent years – begin to wane. The City’s participation in the robust Austin MSA economy and employment base lends additional stability to the rating, in our view, as does the City’s abundance of developable land.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Strong financial operating performance, reflecting somewhat conservative financial management policies and procedures, strong reserve levels, and solid unrestricted liquidity.
- Favorable local economic base, coupled with commutable proximity to Austin and a rapidly growing taxable base.
Credit Challenges
- Property tax levy limitations could adversely impact expenditure flexibility.
- Partial reliance on economically sensitive sales tax receipts to fund operations.
- Elevated overall net debt burden when measured on a per capita basis.
- Substantial infrastructure investments are needed to accommodate rapid ongoing economic growth.
Rating Sensitivities
For upgrade
- The continued realization of robust tax base and revenue growth.
- Continued favorable financial operating performance further bolstering reserve levels and liquidity.
- A protracted decline in the City’s overall net debt burden and anticipated borrowing needs.
For downgrade
- An erosion in reserves or unrestricted liquidity to levels no longer commensurate with the assigned rating.
- A material spike in borrowing and corresponding aggregate debt metrics.
To access rating and relevant documents, click here.