KBRA Affirms AA+ Rating and Revises the Rating Outlook to Stable From Positive on City of Dallas, TX General Obligations
30 Oct 2024 | New York
KBRA Affirms the AA+ Long-Term Rating and revises the Rating Outlook to Stable from Positive on City of Dallas, TX General Obligations, including General Obligation Bonds, Certificates of Obligation and Equipment Acquisition Notes.
The rating affirmation is anchored by the City's sound financial profile, financial management practices, healthy reserves and ample liquidity. The Outlook revision to Stable is based on the limited improvement in the City's pension funding metrics to date which may limit future financial flexibility.
Key Credit Considerations
The ratings were affirmed because of the following key credit considerations:
Credit Positives
- Strong financial profile reflecting fiscally conservative financial management practices, solid reserves, and healthy liquidity.
- Robust economic growth, evidenced by a diverse, growing tax and resource base, and unemployment rates which have trended below the state average.
- History of achieving budgetary balance through operating expense reductions and without the use of reserves, while simultaneously reducing the property tax rate.
Credit Challenges
- Pension costs are expected to remain elevated. Low pension funded ratios have the potential to restrict future financial flexibility.
- Partial reliance on sales tax receipts for operations exposes revenue base to economic fluctuation.
Rating Sensitivities
For Upgrade:
- Tangible progress in addressing full funding of the actuarially determined pension contributions while maintaining robust financial strength.
For Downgrade:
- Deviation from the City’s practice of conservative budgeting would increase credit risk.
To access ratings and relevant documents, click here.