Fitch Downgrades Balch Springs, TX CO and GO Bonds to 'BBB+'; Outlook to Negative.AUSTIN, Texas -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded the city of Balch Springs, Texas' approximately $4.8 million in outstanding general obligation bonds (GOs) and $4.9 million outstanding certificates of obligation (COs) to BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. + from 'A-'. The Rating Outlook is revised to Negative. The downgrade to 'BBB+' reflects the subsequent structural imbalance that led to the near depletion of general fund reserves. The Negative Outlook reflects the potential for continued financial deterioration and the city's recent political instability, culminating in the recall of the majority of the city council in 2004. Fitch assigned an initial rating of 'A-' to the city's GOs and COs in 2002 based on accelerating tax base growth, limited future capital needs, and proximity to the large labor market labor market A place where labor is exchanged for wages; an LM is defined by geography, education and technical expertise, occupation, licensure or certification requirements, and job experience of the Dallas-Ft. Worth metroplex. Cited credit risks included the city's large dependence on economically volatile sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. receipts, slow principal amortization, moderately high overall debt levels, and below average wealth levels. The city incurred operating deficits annually in fiscal years 2001-2005 despite strong annual growth in taxable assessed value over that period averaging 12%. As a result, the city's general fund reserves in fiscal 2004 declined to only $107,000 or 1.7% of expenditures and transfers out, down from 13.9% in 2002. Financial pressures continued through fiscal 2005 requiring the city to issue tax anticipation notes Tax Anticipation Notes (Tans) Notes issued by states or municipalities to finance current operations in anticipation of future tax receipts. to meet its cash flow needs. The city expects to modestly add to its general fund balance in fiscal 2006 and reports year-to-date sales tax returns beating estimates by 2%. Stablization and improvement of the city's finances remains key to maintaining the rating, especially given its dependence on sales taxes for operations. In 2004, residents successfully petitioned and voted to recall four of the city's seven council members due to general dissatisfaction with the city's operations. Efforts to improve financial position are evident. The council that followed pledged to restore the city's financial stability by building general fund reserves, primarily by raising property taxes and promoting the authorization of new sales taxes. In addition, the council has informally adopted a policy to raise the general fund balance to a level equal to 30 days operating costs operating costs npl → gastos mpl operacionales . However, credit concerns remain over the lack of a formal financial recovery plan. Balch Springs, with a 2006 estimated population of 19,600, has experienced only modest growth since 2000. Located in Dallas County Dallas County is the name of five counties in the United States of America:
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