Granite Shoals, TX, GO Debt Rating Raised To 'AA-' From 'A' On Improved Economic And Financial Profile


DALLAS (S&P Global Ratings) March 12, 2019--S&P Global Ratings raised its 
rating on Granite Shoals, Texas' general obligation (GO) debt two notches to 
'AA-' from 'A'. At the same time, S&P Global Ratings removed the rating from 
CreditWatch with developing implications, where it was placed Dec. 18, 2018. 
The outlook is stable.

"The upgrade is based on the improvement in Granite Shoals' economic profile 
from weak to adequate in addition to improvement in the city's budgetary 
flexibility to a relatively low fund balance of $810,000 or very strong 28% of 
expenditures in fiscal 2017 from a nominally low $232,000 or a strong 7% in 
fiscal 2016," said S&P Global Ratings credit analyst Jennifer Garza. 

S&P Global Ratings placed the rating on CreditWatch developing because the 
city only partially supplied the information S&P Global Ratings requested. We 
have removed the CreditWatch placement and assigned a stable outlook because 
we now have information to confirm the city's local economic health, debt 
plans, financial estimates and projections for fiscal years 2018 and 2019, and 
we have completed a thorough review of existing financial policies and 
practices due to the finance director's departure in August 2018.

The rating reflects our opinion of the following factors for the city, 
specifically its:
  • Adequate economy, with market value per capita of $113,985 and projected per capita effective buying income at 70.2% of the national level;
  • Strong management, with good financial policies and practices under our Financial Management Assessment methodology;
  • Strong budgetary performance, with operating surpluses in the general fund and at the total governmental fund level in fiscal 2017;
  • Very strong budgetary flexibility, with an available fund balance in fiscal 2017 of 28% of operating expenditures;
  • Very strong liquidity, with total government available cash at 56.2% of total governmental fund expenditures and 3.4x governmental debt service, and access to external liquidity we consider strong;
  • Adequate debt and contingent liability profile, with debt service carrying charges at 16.7% of expenditures and net direct debt that is 179.8% of total governmental fund revenue, as well as low overall net debt at less than 3% of market value and rapid amortization, with 82.3% of debt scheduled to be retired in 10 years; and
  • Strong institutional framework score.
The stable outlook reflects our expectation that the rating will not change 
over the two-year outlook horizon. We expect Granite Shoals will likely 
continue to make strides in maintaining its very strong budgetary flexibility 
and strong budgetary performance. We believe strong management conditions will 
continue to support the city's financial position.

We could raise the rating if the city can build and sustain its available fund 
balance at a very strong level in compliance with its fund balance policy, 
supported by ongoing strong budgetary performance, and sufficient contingency 
reserves comparable with those of higher-rated peers.

We could lower the rating if the city's budgetary performance or reserve 
position were to materially deteriorate. 
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