Fitch Ratings takes the following rating actions on the city of Princeton (the city), TX as part of its continuous surveillance effort:
-- Approximately $1.2 million general obligation (GO) bonds, series 2007, affirmed at 'BBB';
-- Approximately $9.2 million combination tax and limited surplus revenue certificates of obligation (COs), series 2007, affirmed at 'BBB'.
The Rating Outlook is revised to Stable from Negative.
RATING RATIONALE:
-- The Rating Outlook is revised to Stable from Negative based on a return to a more stable financial profile. The city continues to deal with declining development and a constrained revenue environment, but has maintained satisfactory general fund reserves. Also important to the Outlook revision is the lack of measurable appreciation in the city's high debt burden and limited near-term capital needs.
-- The city benefits from its proximity to the Dallas metroplex economy and is positioned for growth over the long-term.
-- Debt levels are high, but a significant amount of infrastructure is already in place to accommodate additional growth.
-- The financial position is limited but adequate.
-- The mostly residential tax base continues to expand, albeit at a slower rate.
KEY RATING DRIVERS:
-- The city's ability to successfully manage its finances with budgetary balance and maintain an adequate reserve level, especially in light of potential revenue constraints over the next several years, remains a significant rating driver.
-- Successful management of growth and related infrastructure needs is also an important near-term factor in the rating.
SECURITY:
The GOs and COs are direct obligations of the city payable from ad valorem taxes, whose rate is limited to $1.50 per $100 of assessed value, levied against all taxable property within the city. The COs are further secured by a pledge of surplus net revenues of the city's water and sewer system.
CREDIT SUMMARY:
Princeton is a growing residential community of 7,200 people located in Collin County, 32 miles north of Dallas. Residential development and population growth have resulted from improvements to main road arteries, facilitating commutes to Dallas and other nearby suburbs for employment. The city's modest $281 million tax base doubled in size during the housing boom of 2004 through 2007. Since then growth has significantly slowed but remains positive.
While the city's financial position is weaker than historical levels, measured by the unreserved fund balance, the city has stabilized its finances with budget adjustments and has limited its capital outlay expenses from the general fund. These measures are expected to result in positive general fund operating results for fiscal 2009 (estimated) and provide for increased general fund liquidity. Slowing residential development trends and generally weaker economic conditions have put pressure on the city's finances, which will likely continue to pressure finances for several years. As a result, Fitch believes successful financial management to be essential to the rating.
The debt burden remains moderately high despite support for direct city debt by the utility system and state support for overlapping school district debt. Current debt ratios of $2,900 per capita and 7.5% of property value have not changed appreciably over the past several years. While a high debt burden as a percentage of property value is not unusual for a city experiencing rapid growth, significant additional debt could pressure the current rating level.
Additional information is available at 'www.fitchratings.com'.
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Contacts:
Fitch Ratings
Andrew DeStefano, 212-908-0284, New York
Jose
Acosta, 512-215-3726, Austin
or
Media Relations:
Cindy
Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com