Page 297 - Watauga FY22-23 Budget

DEBT SERVICE

an equipment and vehicle storage facility (pole barn) for the Parks facility, and various
capital outlay items.

In August 2021, the City Council approved the issuance of a $4.7 million Combination
and Limited Pledge Revenue Certificates of Obligation issuance to continue the street
program funding and capital equipment funding for needs identified in the 5 year
Capital Improvement Plan and the 5-year Capital Outlay Plan.

In August 2022, the City Council approved the issuance of $4.93 million Combination
and Limited Pledge Revenue Certificates of Obligation to fund street projects, building
improvements, parks projects, and the Capital Outlay plan.

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.

Moody’s also assigned an Aa3 underlying rating to the City’s $7.36 million Combination
Tax and Limited Pledge Revenue Certificates of Obligation, Series 2011. The Aa3
rating reflects the City’s stable financial operations and healthy reserve position. In
September 2011, Fitch Ratings affirmed the City’s $1 million 1998 Certificate of
Obligations at “AA-” with a rating outlook of “Stable.”

Moody’s also assigned an Aa3 underlying rating the City’s $7.730 million Combination
Tax and Limited Pledge Revenue Certificates of Obligation, Series 2012. The rating
reinforced the above strengths listed, as well as the solid management practices
reflected in an increase in the City’s formal fund balance policy and maintenance of
ample reserves. Challenges cited include the declines in the city’s tax base and the
negative five year average annual growth rate in assessed value.

Standard & Poor’s Rating Services assigned its ‘AA’ long-term rating to the City’s $3.50
million Combination and Limited Pledge Revenue Certificates of Obligation, 2014. The

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