Page 255 - Watauga FY21 Budget

DEBT SERVICE

In FY 2014, the City issued $3,500,000 Combination Tax and Limited Pledge Revenue
Certificate of Obligation bonds, which will be paid from property tax levies. This debt
opportunity was available without any increase in the tax rate since the City’s total debt
obligations decreased the end of FY2014. The expansion of the existing Community
Center to provide for an updated Senior Center facility and improvements to Bursey
Road, a major thoroughfare in the City were established as priorities to be funded
through the $3,500,000 debt issuance. These projects began in FY2014-15. Bursey
Road Phase I was completed in FY2015-16 and the Senior Center was completed in
FY2016- 2017.

In FY2015-2016, the City issued $5,885,000 Combination Tax and Limited Pledge
Revenue Certificates of Obligation bonds, which will be paid from property tax levies.
These funds will be used for street improvements throughout the City and quality of life
projects such as a splash pad, trails, and parking improvements.

In FY2016-2017, $1.2 million of the Utility Fund debt service dropped off due to the
final payment being made in FY2015-2016 for the debt service associated with the
purchase of the Water system from North Richland Hills. In the summer of 2017, the
City Council considered and approved additional utility project infrastructure funding by
issuing certificates of obligation in the amount of $7.325 million. These funds were
received in August, 2017 and will be used for water and sewer projects identified in the
City’s 5-year Capital Improvements Project plan over the next several years.

A $6.780 million Certificates of Obligation issuance was approved by Council in
FY2017-2018. Proceeds will be used for street projects, park projects, building
equipment, signage throughout the City, and capital equipment items.
The focus for future budgets will be on phasing in portions of the bond program and
adopting a combination of bond issuance and cash financing to fit within budgetary (tax
rate) constraints. Special consideration will be given to the leveling of City Debt.

Current Bond Ratings

August 18, 2005, Standard and Poor’s raised its underlying rating on Watauga’s
General Obligation debt outstanding one notch to ‘A+’ from ‘A’ based on the
expectation that the City will complete its major identified capital items with the
proceeds of the series 2005 issuance, coupled with a moderating debt burden,
affording management a greater flexibility to fund future capital expenditures with
internally generated cash.

Reflecting the City’s continued conservative financial management, Standard & Poor’s
further increased this rating to “AA” from “A+” on February 8, 2009. In addition, on
October 5, 2009, Fitch Rating Agency issued an affirmation of bond rating of “A,” and
provided a comment of “Stable” for their rating outlook. On April 22, 2010, Moody’s
upgraded their rating from A3 to A2.

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