KBRA Assigns AA+ Rating to City of Pflugerville, TX Combination Tax and Limited Revenue Certificates of Obligation, Series 2023A and Limited Tax Bonds, Series 2023; Affirms Ratings for Outstanding Bonds

KBRA assigns a long-term rating of AA+ to the City of Pflugerville, Texas (Travis and Williamson Counties, Texas) Combination Tax and Limited Revenue Certificates of Obligation, Series 2023A and Limited Tax Bonds, Series 2023. KBRA simultaneously affirms the long-term rating of AA+ for the City’s outstanding Combination Tax and Limited Revenue Certificates of Obligation and Limited Tax Bonds. The Outlook for each obligation is Stable.

KBRA’s Stable Outlook reflects the expectation that Pflugerville will maintain its strong reserve and liquidity levels, and that management will be able to adequately adjust governmental spending should the pace of development moderate – and the associated rate of tax and resource base growth realized in recent years – begin to wane. The City’s participation in the robust Austin MSA economy and employment base lends additional stability to the rating, in our view, as does the City’s abundance of developable land.

Key Credit Considerations

The rating actions reflect the following key credit considerations:

Credit Positives

• Strong financial operating performance, reflecting somewhat conservative financial management policies and procedures, strong reserve levels, and solid unrestricted liquidity.
• Favorable local economic base, coupled with commutable proximity to Austin and a rapidly growing taxable base.

Credit Challenges

• Property tax levy limitations could adversely impact expenditure flexibility.
• Partial reliance on economically sensitive sales tax receipts to fund operations.
• Elevated overall net debt burden when measured on a per capita basis.
• Substantial infrastructure investments are needed to accommodate rapid ongoing economic growth.

Rating Sensitivities

For upgrade

• The continued realization of robust tax base and revenue growth.
• Continued favorable financial operating performance further bolstering reserve levels and liquidity.
• A protracted decline in the City’s overall net debt burden and anticipated borrowing needs.

For downgrade

• An erosion in reserves or unrestricted liquidity to levels no longer commensurate with the assigned rating.
• A material spike in borrowing and corresponding aggregate debt metrics.

To access rating and relevant documents, click here.

Methodologies

Public Finance: U.S. Local Government General Obligation Rating Methodology

ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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