The City of Round Rock has earned an upgrade to AAA – the highest credit rating possible. The upgrade marks the second time in less than a year the City’s fiscal worthiness has been recognized with an AAA rating.
Round Rock is one of only eight cities in Texas with AAA ratings for both General Obligation (GO) and Utility debt. There are 36 Texas cities with an AAA rating for GO debt, which is supported by property taxes.
“To earn a second AAA rating is an outstanding accomplishment for the City of Round Rock,” Mayor Craig Morgan said. “The upgrade clearly demonstrates our financial stewardship is second to none, and our local economy is strong and growing – two strategic priorities of this City Council. Best of all, it means savings for our property taxpayers.”
The AAA rating means lower interest rates, which reduces the City’s borrowing costs. The rating will benefit the City’s upcoming sale of $7 million in certificates of obligation to fund a public works facility for its Transportation and Utilities departments.
“This is amazing news,” City Manager Laurie Hadley said. “The City Council’s long-term focus on fiscal planning continues to pay off for our citizens. CFO Susan Morgan and her team deserve high praise for their management of our finances.”
S&P noted the upgrade “reflects Round Rock’s very strong economy and maintenance of a strong financial position … (and) very strong management, with strong financial policies and practices.” It cited the City’s successful strategies to mitigate risk from any single large sales tax generator.
“Round Rock instituted a revenue policy that caps net sales tax revenues from Dell at no more than 20% of sales taxes designated for operations,” S&P noted. “In total, sales tax revenues generated by Dell are projected at 9% of general fund operating revenues for fiscal 2019, down from as much as 22% in 2005. In our opinion, strong management practices and a commitment to maintaining very strong reserve levels should support the maintenance of stable operating performance over the near-to-medium term. The debt profile, while somewhat elevated compared with peer medians, should remain stable due to the city’s limited debt needs and funding strategy that seeks to use pay-as-you-go funding, potential roadway impact fees, and grants to finance the majority of the city’s major outstanding capital needs.”
Other factors in the upgrade include:
- Strong budgetary performance
- Very strong budgetary flexibility
- Very strong liquidity