Fitch Upgrades Denison, Texas GOs to 'A+'; Outlook Stable

AUSTIN, Texas--(BUSINESS WIRE)--In the course of routine surveillance, Fitch Ratings upgrades to 'A+' from 'A' the rating on the city of Denison, Texas' (the city) approximately $5.5 million in outstanding general obligation (GO) bonds, series 2005. The Rating Outlook is Stable.

The upgrade reflects the city's consistent favorable financial performance, growing taxable values, and average debt position. The rating also incorporates the city's moderate tax base concentration and below-average wealth levels. While the city has additional near-term borrowing plans, associated debt service is expected to be supported from utility revenues.

Denison is located 75 miles north of Dallas just south of the Texas-Oklahoma border on Lake Texoma. The city's current population is estimated at 24,000 and future population growth should be aided by northward expansion of the Dallas metropolitan area and the North Texas Tollway into the city. In addition, there have been a number of second homes purchased along the shore of the Lake Texoma. The city's financial profile is characterized by consistently sizable reserve levels, well above the charter requirement of 5% of appropriations. For the close of fiscal 2008, the general fund balance stood at a sizeable $6.9 million, or nearly 36% of expenditures and transfers out. The undesignated portion of the fund balance is also substantial at $5.3 million or about 28% of spending.

Financial results have benefited from conservative budgeting practices as well as growth in property taxes and sales taxes, the largest sources of operating support. For the close of fiscal 2009, officials project a modest $320,000 operating deficit, primarily due to capital related expenses, while the fiscal 2010 budget is balanced. It should be noted that actual financial results have historically outperformed the budget.

Denison's tax base, valued at approximately $953 million, has seen increases averaging 7.6% annually since 2005. While there has been a slowdown in residential construction due to the national recession, commercial development is ongoing, including the construction of a new hospital and medical office building. There is some taxpayer concentration, with the top 10 representing nearly 15% of taxable values, although there is good mix of industry represented. Independent housing information points to below-average foreclosures and mortgage delinquencies; additionally, property tax collections remain strong. Area employers are relatively diverse and include food processing, high-technology manufacturing, healthcare, claims processing, and tourism. Wealth levels are below average while county unemployment is slightly above the statewide average but below the national rate.

The city's debt ratios are moderate, benefiting from self-support from the city's utility. Payout on all debt, including series 2007 bonds and 2008 certificates of obligation (COs) (which were not rated by Fitch) is about average. The city is a participant in the Texoma Area Solid Waste Authority (TASWA) for the operation and maintenance of a landfill. TASWA's contract revenue bonds are payable from gross revenues of the authority, which primarily consist of payments from the member cities of Denison, Sherman and Gainesville. Denison's share of debt service is approximately 25%. The city anticipates issuing $7 million in COs early 2010 for various water and sewer improvements; debt service is expected to be paid from utility system revenues.

Additional information is available at 'www.fitchratings.com'.

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