The City of Round Rock bond rating has been upgraded by Moody’s and Standard & Poor’s. The upgrade is expected to result in $2 million in savings on the bond transactions the City Council approved at its July 12, 2007, meeting.

“The rating upgrade reflects a diversifying and sizeable tax base that continues to expand at a healthy pace, a solid financial position marked by conservative fiscal policies, a manageable debt burden, favorable wealth levels, and a strong management team,” Moody’s report stated.
 
According to Standard & Poor’s, its rating is based on the City’s “boosting wealth and income levels; good financial performance, including high reserve levels and strong financial management practices; and recent growth in the healthcare and retail sectors, in line with management’s goals of economic diversification and expansion.”
 
The City Council is considering issuing $34.8 million in general obligation bonds, $25 million in refunding bonds and $14.8 million in certificates of obligation. 
 
Ratings among the best
Moody’s upgraded the City’s rating to Aa2 from Aa3. Standard & Poor’s upgraded its rating to AA from AA-. Download the complete Moody’s report (PDF) and Standard and Poor’s report (PDF). The upgrade puts the City of Round Rock in the upper tier of municipalities. There are only two possible higher ratings in the City’s rating category.
 
Analysts from the independent rating services visited Round Rock in late May for a day each of presentations and a tour of the City. The week after their visits, Dell – the City’s largest employer, largest property tax payer and largest sales tax producer – announced a 10 percent reduction in its worldwide workforce. The ratings were published after the Dell announcement.

“We convinced those analysts that not only can we thrive with a concentrated wealth center like Dell, creating great opportunities for us, but what we’ve done is taken that opportunity and managed it quite well, we’ve managed it conservatively and we’ve diversified from it,” Mayor Nyle Maxwell said. “That impressed the analysts.”
 
The opening of Round Rock Premium Outlets and IKEA, as well as Scott & White’s University Medical Campus and the future opening of Seton Medical Center Williamson, were noted by both rating services. Diversifying the local economy – with an emphasis on targeting destination retailers – has been a Council goal since 2003.

The City’s financial management policy – which limits the amount of Dell sales tax revenue for daily operations and using cash when possible instead of issuing debt – as well as its effective long-term capital planning, were also favorably noted by the analysts.

Bond projects
The general obligation bonds are the third and final issuance of the $89.8 million approved by voters in 2001. Among the projects included in this issuance are:

• $11.6 million for a new City Hall
• $6.8 million for a recreation center west of IH-35
• $680,000 for new trails
• $676,000 for new traffic signals
• $3.4 million for the Creekbend Boulevard extension
• $2.6 million for reconstruction of Chisholm Trail
• $5.0 million for neighborhood street improvements

The certificates of obligation will be used to fund $12.6 million in improvements to the Sports Complex at Old Settlers, and $2 million to be used in a partnership with the YMCA to build an indoor, community swim center that includes a competitive pool.

Due to favorable bond market, the refunding bonds are expected to save taxpayers between $188,000 and $349,000 a year in interest savings for the next 20 years.