Texas Business reports: Fitch Ratings has affirmed its 'AA' rating on the following Granbury bonds as part of its surveillance efforts:
--$5.6 million general obligation (GO) bonds;
--$28.5 million combination tax and revenue certificates of obligation (COs).
The Rating Outlook is Stable.
--The city's financial position remains strong, as evidenced by large reserve levels, enabled by management's attention to maintaining structural balance during the economic slowdown that impacted the city's largest revenue source - sales taxes.
--Credit concerns over the city's significant reliance on economically sensitive sales tax receipts for operations are partially offset by its large financial reserves, conservative budgeting, and demonstrated ability to make significant mid-year budget adjustments. Additionally, the city's low property tax rate provides flexibility to the city in the event it needs to adjust its revenue composition in the future.
--The debt profile is mixed, characterized by moderately above average debt on a per capita basis, balanced against a rapid pay out rate and limited future debt plans.
--The city maintains a five-year strategic plan that maps the city's future capital and operational needs amid a fast growing environment.
--The local economy is sound, serving both as a bedroom community of Forth Worth and as the retail hub for Hood County. Tourism and recreation also benefit the city's employment and sales tax base.
KEY RATING DRIVERS:
Continued attention to the conservative budgeting of sales tax revenues and the maintenance of large financial reserves are key to preserving current credit quality.
The GO bonds and COs are secured by an annual property tax levy limited to $2.50 per $100 taxable assessed valuation. The COs are additionally secured by a pledge of net revenues of the city's water and sewer utility system.
Granbury is located 25 miles southwest of Fort Worth and is the county seat and retail hub of Hood County. The estimated 2009 population of 7,850 represented a large 25% increase from the 2000 census total. In addition to serving as the commercial and retail hub of the county, the city has emerged as a popular tourism and recreation destination. County wealth levels, as measured by per capita buying income and median household buying income, are only marginally higher than both state and national averages. However, per capita retail sales are moderately above average given the substantial retail presence that reportedly serves a much larger service area of about 60,000. Economic growth in and around Granbury continues albeit at a smaller pace. Notably, new construction offset residential reappraisal declines in fiscal 2011, resulting in a very modest decline of less than 1% in taxable assessed valuation (TAV). Over the previous five-year period, annual TAV growth averaged a high 17%, reflective of steady residential construction, including developments at the higher end of the market in projects adjacent to Lake Granbury. Ongoing commercial activity, including a retail center in recently annexed acreage, will add to the city's property and sales tax base in fiscal 2012.
The city's financial profile is characterized by substantial operating reserves and generally positive operating results. Annual unreserved general fund balances over the past five audited fiscal years peaked at a very high 50% of spending, then declined to a still large 29% in fiscal 2008 due to a planned shift in the property tax levy from operations and maintenance to debt service. In response to the economic slowdown, the city reduced its expenditures (via a hiring freeze and elimination of pay-go capital outlays) by a notable 10% in fiscal 2009 and 2010, enabling the city to maintain balanced operations.
Sales tax revenues are by far the largest operating revenue source, equal to a high 53% of total general fund revenue in fiscal year 2009. Despite a 6.3% decline in sales taxes in fiscal 2009, the city added modestly to its unreserved fund balance, totaling $3.8 million or a high 35% of spending, well in excess of the city's 25% formal fund balance policy. Similarly, unaudited fiscal 2010 results point to another modest surplus despite a large 10% sales tax decline. Fiscal 2010's unreserved fund balance is projected to equal a notably higher 41% of the city's reduced spending base. These reserves offer a sizeable cushion in the event of additional sales tax revenue declines. The fiscal 2011 budget is balanced, based on the city's assumption of another 5% sales tax decline which may prove conservative given year to date figures showing 8% growth. The city's total property tax rate remains level at 41.5 cents per $100 of taxable value, among the lowest in the area.
The city's overall debt ratio is above average on a per capita basis at $5,672 but moderate as a percentage of market value at 3.3%. The pace of debt retirement is above average at 59% in 10 years. The city's general government capital needs, as outlined in the five-year strategic plan, are modest and will be funded with current resources. No additional debt financing is currently planned except for a fully utility-supported tax note for water and sewer improvements.