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LCEC S&P Rating on GO Bonds

LCEC S&P Rating on GO Bonds

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Published by Irving Blog

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Published by: Irving Blog on Jun 01, 2012
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Irving, Texas; General Obligation
Primary Credit Analyst:
Sarah Smaardyk, Dallas (1) 214-871-1428; sarah_smaardyk@standardandpoors.com
Secondary Contact:
Horacio Aldrete-Sanchez, Dallas (1) 214-871-1426; horacio_aldrete@standardandpoors.com
Table Of Contents
May 30, 2012
971149 | 301375771
Irving, Texas; General Obligation
Credit Profile
Irving GO
Long Term Rating 
AAA/Watch Neg On CreditWatch Negative
Standard & Poor's Ratings Services placed its 'AAA' long-term rating on Irving, Texas' general obligation bonds onCreditWatch with negative implications.The CreditWatch placement reflects what we believe to be a change in the city's financial and risk managementpractices, which could result in reduced financial and budgetary flexibility. Furthermore, we believe that the city'sfinancial decision making process has become increasingly politicized, which, in our view, represents a departurefrom the city's historically strong financial management practices and raises questions regarding how the city willhandle debt issuance and capital expenditures moving forward.Our CreditWatch action follows the issuance of a B/Stable rating on the city's planned issuance of approximately$213.7 million in hotel occupancy tax revenue bonds and incorporates the effect that this proposed financing couldhave on the city's overall financial position. The impact potentially includes the need for Irving to raise its propertytax rate by an additional 8.5 cents per $100 of assessed value to cover a portion of its hotel tax-secured series 2009certificates of obligation. We believe that the pursuit of this financing has not only the potential to hamstring thecity's flexibility to address other future capital and budgetary needs, but it also represents a change in the city'sapproach to managing its debt and liability profile, which we view as inconsistent with the financial managementpractices we observe in other 'AAA' rated peers. For more information on our opinion of the hotel occupancy taxissuance, please see the analysis published May 30, 2012 on RatingsDirect.We expect to resolve the CreditWatch status upon further discussions with city management regarding long termcost projections and commitment to the project, as well as the effect on the city's overall debt levels and operatingand capital budgets now and in the future.
Related Criteria And Research
USPF Criteria: GO Debt, Oct. 12, 2006Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal atwww.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's publicWeb site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Standard & Poors
| RatingsDirect on the Global Credit Portal |
May 30, 2012
971149 | 301375771

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