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S&P Global Ratings assigned its ’AA’ long-term rating to Watauga, Texas’ approximately $3 million series 2020 combination tax and limited pledge revenue certificates of obligation. At the same time, S&P Global Ratings affirmed its ’AA’ long-term ratings on the city’s previously issued certificates of obligation. The outlook is stable.
The maximum allowable ad valorem tax rate in Texas is $2.50 per $100 of assessed value (AV) for all purposes, with the portion dedicated to debt service limited to $1.50. The City of Watauga’s total tax rate is well below the maximum, at 58.05 cents, 17.46 cents of which is dedicated to debt service. S&P views the limited-tax general obligation (GO) debt pledge on par with the city’s general creditworthiness.
Watauga is a primarily residential suburb of nearby Fort Worth, and continued growth and expansion within the Dallas-Fort Worth-Arlington metropolitan statistical area (MSA) has supported healthy tax base growth. S&P’s view of Watauga reflects the city’s strong financial management that is supported by a framework of consistent budget monitoring and long-term planning to address future budgetary challenges and community infrastructure needs. In the near term, S&P expects that the city’s very strong reserve position could serve as a source of near-term budget stability to cushion against material financial deterioration tied to the COVID-19 pandemic and ensuing recession.