Dallas, TX's $540M GO Pension Bonds Rated 'AA+'; Outlook Stable
DALLAS (Standard & Poor's) Jan. 10, 2005--Standard & Poor's Ratings Services
assigned its 'AA+' rating, and stable outlook, to Dallas, Texas' $183.884
million series 2005A, $256.207 million series 2005B, $25.000 million series
2005C, and $75.000 million series 2005D taxable general obligation pension
bonds.
The bonds are scheduled to sell on Jan. 14.
The rating agency also affirmed its 'AA+' standard long-term rating and
underlying rating (SPUR) on the city's general obligation debt outstanding.
City officials are issuing the bonds to fund, in part, a roughly $535
million accumulated unfunded actuarial accrued liability. The city's full
faith and credit pledge secures the bonds.
"While financial pressure will continue, we believe city officials will
balance future budgets with little or no use of operating reserves," said
Standard & Poor's credit analyst James Breeding. "In addition, the city
council's willingness to aggressively address Dallas' capital needs is key to
the city's maintenance of its 'AA+' rating."
The ratings reflect the city's sizable and diverse property tax base,
role in the regional economy's continued economic growth, manageable debt
burden, and adequate financial reserves.
Challenges for the city include long-term structural changes in the area
economy and the corresponding effect on Dallas' competitive position compared
with other cities, ongoing budget pressures due to recent soft revenue
collections and deferred operating and capital expenses, and aging
infrastructure that will require significant ongoing capital investment beyond
the current bond program.
Over the past few years, the unfunded actuarial accrued liability grew to
$646 million at fiscal year-end 2003 from a low $11 million at fiscal year-end
1999. The funding ratio was a very high 99.4% in 1999, but it decreased to
just 74.5% in 2003. With the electorate's approval, city officials have chosen
to issue these bonds to address this liability. In addition to this issuance,
management is implementing other adjustments to the city's retirement plan.
While the ratio of city-to-employee contributions will remain the same at
about 63% to 37%, the contribution rate for each will increase. The rates will
be automatically adjusted annually. The city will make a portion of its
contribution in the form of direct payments to the plan with the remainder
paying debt service on these bonds.
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating action can be found
on Standard & Poor's public Web site at www.standardandpoors.com; under Credit
Ratings in the left navigation bar, select Find a Rating, then Credit Ratings
Search.
| Primary Credit Analyst: | James Breeding, Dallas (1) 214-871-1407; james_breeding@standardandpoors.com |
| Secondary Credit Analyst: | Alexander M Fraser, Dallas (1) 214-871-1406; alexander_fraser@standardandpoors.com |
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