Sugar Land’s commitment to financially responsible governance was recently recognized with the highest possible ratings from two international bond rating agencies.
Standard & Poor’s raised its long-term rating and underlying rating on Sugar Land’s existing general obligation debt to “AAA” from “AA+.” At the same time, Standard & Poor’s assigned its “AAA” long-term rating to the City’s Series 2011 Combination Tax and Revenue Certificates of Obligation. Fitch Ratings confirmed the “AAA” rating assigned to the City. Both agencies have a stable outlook for the City’s finances. In addition, Standard & Poor’s deems Sugar Land’s financial management practices “strong” under its FMA methodology, which indicates that the city’s financial practices are strong, well embedded and likely sustainable.
“Triple A ratings are not easily achieved, and they place us among the ranks of just a few Texas cities to earn this elite status,” said City Manager Allen Bogard. “The bond ratings agencies specifically recognized our commitment to strong fiscal stewardship despite difficult economic times. This is a value that reflects our corporate culture, but it also reflects the goals that City Council has established. We should be very proud of how we’ve managed the City during this difficult
In Texas, Fitch Ratings has assigned the “AAA” to eight cities, and S&P has awarded the “AAA” to 19 cities. Seven Texas cities carry the “AAA” from both agencies, including Austin, Carrollton, Colleyville, Lewisville, Plano, San Antonio and Sugar Land. Sugar Land’s bond ratings were evaluated at the City’s request in conjunction with the issuance of $98.55 million in Certificates of Obligation scheduled for sale on April 19.
The certificates will fund construction of the City’s Surface Water Treatment Plant, transmission lines and water plant upgrades to facilitate blending of groundwater and surface water.
The high bond ratings mean the City and its taxpayers will benefit from the lowest available interest rates and will pay less in interest and insurance costs when issuing debt for major capital projects.
“The raised ratings are based on our view of the city’s continued
maintenance of very strong reserves despite the economic uncertainty
related to the national recession,” said Standard & Poor’s credit
analyst Russell Bryce.
According to Standard & Poor’s report:
We believe that Sugar Land’s financial performance remains very strong and consistent. Despite growth pressures and a high debt service carrying charge, management has achieved operating surpluses in each of the past seven years. Since fiscal 2004, the city has posted annual operational surpluses in excess of $70,000 and maintained reserve levels that have accounted for no less than 28% of operating expenses — which exceeds the city’s 25% minimum target.
The city ended fiscal 2010 with a $142,000 net general fund result despite a $1.5 million decline in sales tax collections. While the adopted fiscal 2010 budget had reflected a $3.3 million drawdown, officials report that the city was able to achieve an operating surplus because of cost containment measures including the continuation of a hiring freeze implemented in fiscal 2009 and the deferment of some capital projects; overall, the city’s general fund expenditures fell by $4.7 million, or about 7.5%, from fiscal 2009.
Standard & Poor’s and Fitch Ratings both issue credit ratings for the debt of public and private corporations, including government agencies. The firms independently rate borrowers on a scale from AAA to D, with AAA being given to only the highest quality borrowers considered to be the most reliable and stable for investors with an “extremely strong capacity to meet financial commitments.”