S&P Global rated all of the City of Round Rock’s most recent property tax-backed debt issuances with an AAA long-term rating, the highest possible, citing the City’s “very strong” management and “strong” budgetary performance in conjunction with the area’s “very strong” economy.

S&P Global affirmed the rating in April, which will result in significant interest savings in a series of debt issuances approved by the Round Rock City Council on April 28 for transportation, ongoing construction of the voter-approved new Round Rock Public Library project and fleet purchases.

According to S&P Global’s analysis, the ratings for the property tax-backed issuances reflect its opinion of Round Rock’s:

• Very strong economy in one of the fastest-growing metropolitan statistical areas (MSAs) in the state;
• Robust financial policies and practices and a strong institutional framework score; and
• Solid operating performance, with very strong reserves and liquidity.

The City’s AAA rating saves the City approximately $3 million in interest payments in its most recent bond issuance versus if the City had the lower AA rating, based on recent comparable bond issuances, said Garry Kimball of Specialized Public Finance, the City’s financial advisor.

Thursday’s bond issuances included the following:

• $21.7 million in voter-approved General Obligation (GO) bonds for the new Round Rock Public Library currently under construction;
• $27.75 million in Certificates of Obligation (CO) for the City’s ongoing Driving Progress program to increase capacity and connectivity in Round Rock’s road network; and
• $2 million in limited tax notes to pay for replacement vehicles for the City’s fleet.

In its credit overview, S&P Global cited Round Rock’s access to Austin, multiple colleges and high-tech industries, and a large, educated workforce that remains attractive to businesses and individuals alike, resulting in ongoing economic growth.

“The local economy has not experienced any contraction due to the pandemic. In fact, growth has continued,” the report stated, referring to new and upcoming developments in Round Rock including Kalahari, The District, Switch Inc., residential projects and more.

The S&P analysis also cited the City’s “robust management policies and practices,” which include the City’s historical trend analysis and regular budget-to-actual updates provided to the City Council.

“Management uses conservative revenue and expenditure assumptions based not only on trend analysis, but also on economic modeling from internal and external input from third-party consultants,” the report states. “The city monitors and reports its budgetary performance, including year-to-date actual results against budgeted, and investment portfolio on a quarterly basis to the city council.”

The report continues: “Given ongoing economic development and continued revenue growth, as well as very strong management, we believe Round Rock will maintain stable operating performance and very strong reserves that will provide flexibility against potential volatility in sales taxes stemming largely from its exposure to its largest corporate presence, Dell Inc.”

The report stated that “the rapid growth the city is experiencing will continually increase demand for services and infrastructure, but we believe very strong management practices, including comprehensive risk management around cyber security, will aid Round Rock in maintaining healthy finances and manageable debt carrying charges.”