NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AAA' rating to approximately $138 million of Texas Public Finance Authority (TPFA) State of Texas general obligation (GO) bonds, consisting of:
--$132,740,000 State of Texas GO refunding bonds, series 2015A;
--$5,240,000 State of Texas GO park development refunding bonds, series 2015B.
The bonds are expected to sell via negotiated sale on or about April 15, 2015.
The Rating Outlook is Stable.
SECURITY
The bonds are general obligations to which the state pledges its full faith and credit.
KEY RATING DRIVERS
LOW DEBT: The state's debt burden remains low despite significant growth-related capital needs, especially for transportation. Amounts for debt service are constitutionally dedicated.
GROWTH-ORIENTED ECONOMY: The state's economy is large, diverse, and is growing rapidly relative to national averages. The state's energy industry remains a significant source of economic activity and continues to be subject to volatility.
SIGNIFICANT RESERVE BALANCES: Financial operations are generally conservative. The state has built a sizable budget reserve, with a portion of natural resource receipts dedicated to funding it.
SALES TAX DEPENDENCE: Finances are dependent on consumption-based (primarily sales) taxes; volatile energy taxes are also important.
GROWTH-RELATED SPENDING PRESSURES: Longer-term fiscal pressures stem from having to adequately fund the state's rapid growth. This includes expanded transportation needs, school funding, and water needs.
RATING SENSITIVITIES
ECONOMIC GROWTH AND HIGH RESERVES: The state's GO rating and Stable Outlook assume the maintenance of high reserve balances and continued economic growth. The rating could be pressured in the event of severe revenue weakness, including stemming from cyclicality in the state's large energy sector, or unwillingness to address potential fiscal challenges in an effective and timely manner.
CREDIT PROFILE
The state's long-term 'AAA' GO rating reflects its low debt burden, conservative financial operations and a growth-oriented economy that continues to outpace national averages. Financial pressures arise from the demands placed on the state's consumption-based tax system by its rapid growth, including addressing transportation, education and water needs.
Texas' GO bonds are payable from a constitutional appropriation out of the first moneys coming into the state treasury not otherwise appropriated. This unrestricted balance equaled nearly $48 billion as of Aug. 31, 2014, the fiscal year-end.
The TPFA is a state agency that issues GO bonds, CP notes, lease obligations and revenue bonds on behalf of multiple state agencies and higher education institutions, subject to state legislative authorization. As of Aug. 31, 2014, the TPFA had approximately $2.1 billion in outstanding GO bonds, including $487 million issued for the Cancer Prevention and Research Institute of Texas (CPRIT), a state research institution for which $3 billion in GO bonds were authorized by voters.
For additional information on the GO rating of the State of Texas, please see Fitch's press release dated Feb. 26, 2015, 'Fitch Rates Texas $200MM GO Water Bonds 'AAA'; Outlook Stable,' which is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'Pension Pressures Continue: 2014 State Pension Update' (May 14, 2014).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
U.S. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033
Pension Pressures Continue (2014 State Pension Update)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=747605
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982160
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