KBRA Affirms AA+ Rating and Positive Outlook on City of Dallas, TX General Obligations
25 Oct 2023 | New York
KBRA affirms the AA+ Long-Term Rating and Positive Outlook on the City of Dallas' General Obligations, including General Obligation Bonds; Certificates of Obligation and Equipment Acquisition Notes.
The affirmation of the AA+ Rating and Positive Outlook reflects KBRA’s expectations for continued favorable resource base and financial performance trends against the backdrop of a stable, post-pandemic operating environment. The disciplined management of City’s fixed cost obligations, as evidenced by material and sustainable increases in annual pension contributions, will be critical to upward rating movement.
Key Credit Considerations
The rating was 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.
- Ability to achieve budgetary balance through operating expense reductions and without the use of reserves.
Credit Challenges:
- Partial reliance on sales tax receipts for operations exposes revenue base to economic fluctuation.
- Pension costs are expected to remain elevated.
Rating Sensitivities
For upgrade:
- Sustained, robust financial operating performance across the near-term supported by continued strong growth in the City’s resource and assessment base.
- Ability to absorb increasing pension contributions while maintaining robust financial strength.
- Ability to adapt to the new property tax limitation without significant impact on operations would be viewed positively.
For downgrade:
- Deviation from the City’s practice of conservative budgeting would increase credit risk.
To access rating and relevant documents, click here.