Fitch Assigns 'AA' Rtg to $11.535MM Grand Prairie, TX GOs/COs.

Business Editors

AUSTIN, Texas--(BUSINESS WIRE)--March 7, 2003

Fitch Ratings has assigned a 'AA' rating to the City of Grand Prairie, Texas' (the city) $11,035,000 general obligation refunding and improvement bonds, series 2003 (bonds) and $500,000 combination tax and revenue certificates of obligation, series 2003 (COs). Additionally, Fitch affirms the 'AA' ratings on the city's $60,051,234 general obligation bonds and $48,585,000 COs outstanding. The Rating Outlook is Stable. Dated March 1, 2003, both series are scheduled to sell on or about March 11 via a syndicate led by RBC Dain Rauscher. The bonds will mature serially Feb. 15, 2004-2023; the COs will mature Feb. 15, 2004-06. Bonds maturing on and after Feb. 15, 2012 are subject to optional redemption at par plus accrued interest on Feb. 15, 2011, or any date thereafter. The COs are not subject to optional redemption prior to maturity. The bonds and COs are direct obligations of the city, payable from an ad valorem tax levied against all taxable property in the city subject to a $2.50 per $100 taxable assessed valuation (TAV) limitation. The COs are further secured by a limited pledge, not to exceed $2,500, of net revenues of the city's water and wastewater system. Bond proceeds will refund a portion of the city's outstanding general obligation debt and fund street, drainage, and public safety improvements. CO proceeds will be used to acquire equipment for the transportation, parks and information technology departments.

The 'AA' rating on the bonds and COs reflects the city's continued tax base expansion and diversification, prudent financial stewardship and sound fiscal operations, and moderate direct debt burden. Economic development efforts have been successful in attracting commercial and industrial businesses, which are traditional strengths of the economic base. Residential development has been resilient despite the economic downturn and retail trade has followed, further diversifying the tax and economic base. The ongoing development has resulted in healthy tax base growth, producing additional property tax revenues for the city. General fund finances are consistently solid, and reserves are maintained at healthy levels. Sales tax receipts have declined modestly as the economy has cooled. However, the city's limited reliance on sales taxes for operations, sizeable reserves and a conservative approach to budgeting should minimize the impact of a prolonged slump in sales tax revenues.

City finances have been characterized by generally positive operating results and large general fund balances. The general fund ended fiscal 2001 with an unreserved, undesignated balance of nearly $15 million, representing more than 20% of expenses and transfers out. Liquidity was equally sound, with cash and short-term investments totaling $13.9 million for the same period. Preliminary fiscal 2002 results indicate a continuation of this positive trend. Property taxes, sales taxes and franchise fees are the three primary general fund revenue sources; strong assessed valuation growth allowed property tax rate reductions for two consecutive fiscal years in 2000 and 2001, and the rate has held steady since then. Preliminary results indicate that sales tax receipts in fiscal 2002 dipped slightly below prior year totals. While year-to-date receipts are running slightly ahead of budget, the current projection is for collections for the entire year to fall short of budgeted totals by roughly 2%. These numbers compare very favorably with other cities in the Dallas-Fort Worth region, a number of which are experiencing double digit percentage drops in sales tax revenues.

Subsequent to this issue, the city will have $61.2 million of general obligation bond authorization remaining. Voters approved $76 million in new bonding authority in November 2001, providing for public safety, storm drainage, and street improvements. Voters also approved the four-year collection of an additional one-quarter cent sales tax to be used for street improvements. Direct debt per capita and as a percent of TAV are moderate. The inclusion of overlapping debt into these figures, primarily from local school districts, results in high overall ratios of 7.0% of TAV; however, state support for school district debt service reduces these overall ratios. Principal retirement is above average, with almost 65% of property tax-supported debt retired in 10 years.

Grand Prairie is located in the Dallas-Fort Worth (DFW) metroplex, directly between the two major cities and south of DFW International Airport. The city has an estimated 2002 population of 134,450. The city limits lie in the four counties of Dallas, Tarrant, Ellis, and Johnson, and its boundaries cover 80 square miles. The city has aggressively pursued and utilized several economic development initiatives and tools, including tax abatement, freeport exemptions, and the creation of three tax increment financing districts. Defense, manufacturing, aerospace, and distribution continue to be major components of the local economy. In addition, retail trade and entertainment have emerged recently as significant economic components and serve to diversify the mix. To further assist economic development initiatives, Grand Prairie voters authorized an additional 2% hotel/motel tax and a dedicated quarter-cent sales tax to develop and improve the municipal park system in November 1999. Income and wealth levels are above both state and national averages, and local unemployment rates recently have approximated state and national levels.