By Andy Sevilla.
Kyle now has a AA- designation from the national rating service, Standard & Poor’s, up from the A+ designation it received a year ago.
The upgrade was for the city’s long-term rating and underlying rating for general obligation (GO) debt. It comes just as city officials prepare to issue $1.866 million in short-term debt for capital expenditures.
Kyle is issuing close to $2 million in tax notes for the capital purchases council members approved during budget deliberations last fall, and gave a final thumbs up last month.
Officials plan to purchase various equipment, vehicles for three city departments, technology upgrades, water reservoir rehabilitation and portable defibrillators for several city facilities with the tax notes.
Kyle’s adequate economy, very strong budgetary flexibility, adequate budgetary performance, very strong liquidity (which includes the $36 million road bond monies), strong management conditions, very weak debts and contingent liabilities, and strong institutional framework factored into the S&P rating upgrade, according to the service’s report.
“The City Council and City staff have worked together to develop and implement sound fiscal policies that result in our improving bond rating,” Mayor Lucy Johnson said in a statement. “Issuing debt is always an important decision for any council and we give these decisions a lot of careful thought.”
City Finance Director Perwez Moheet told council members at a Feb. 18 meeting that the tax notes could potentially raise property taxes by as much as two cents next fiscal year, and that amount could be augmented even more with potential issuances of road bond dollars set to improve five city streets.
Kyle has the highest ad valorem tax rate – $0.5483 per $100 of property valuation – of any other city in Hays County, and the service said the city has $1.55 billion in taxable assessed value this year.
“We only move forward with (debt) when we confirm that the funds are investments to our city in terms of needed infrastructure or service delivery,” Johnson said. “The vehicles and equipment being purchased with these funds will directly benefit our citizens through improved customer service, important infrastructure upgrades, and a more efficient operational status for our equipment.”
Officials said the debt being issued would allow the city to catch up on capital purchases that were delayed because of the national economic downturn of the past few years.
Despite the national recession, Central Texas fared better than the nation in terms of downturn effects. The area continued seeing explosive growth, which helped Kyle maintain upward economic mobility if even at a slower rate than in years before.
However, in the past year, the city’s economy has experienced positive growth at an accelerated pace officials say afforded Kyle more resources to work with. The city took in $4.01 million in sales tax revenue last year, a 54 percent hike from 2009.
“Our council policy directives, management efforts, and the vast improvement in the city’s financial position over the past three years have all contributed in the ratings upgrade today from S&P,” Moheet said.
The services had previously assigned its A+ designation to the city’s long-term rating and defined a stable outlook to Kyle in February last year for refinancing $14.2 million in debt, which saved the city $1 million in financing costs over the 17-year life of the bonds which funded the extension of Kyle Parkway east of Interstate 35 to Dacy Lane. The refinancing last year also leveled out debt payments for the following three years.
On Tuesday, council gave final approval authorizing the issuance of $1.95 million in tax notes – $1.866 for capital purchases, plus the cost of issuance. The tax notes will be issued by April 30.
