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Ennis Daily News

City receives good grade

Students aren’t the only ones that know the importance of getting straight A’s. The city of Ennis was notified this week that their general obligation bond rating had been upgraded from an “A” to an A+, according to the S&P (Standard & Poor’s) Rating Service, which is one of two top industry rating systems.
City Manager Steve Howerton said he was glad to hear the news and explained what it means for the city.
“The City of Ennis is pleased to receive the ‘A+’ bond rating, especially at a time when the national economy is faltering and many cities are having extreme financial difficulty,” he said.
The bond system is put into place by school districts or cities when they want to undertake a costly project such as new schools, a hospital or street construction. Buyers purchase the bonds and fund the project at the time, but are paid back over time from taxes the entity that issued the bonds collect. Instead of a city or school district going to the bank for a loan for projects, this is their method of borrowing funds.
The rating system allows purchasers to know the strength of the entity to pay back the bond before they purchase the debt. The higher degree of rating the entity selling has, the more competitive the market is for buyers to purchase the bonds. Public entities try to maintain a high rating because it improves the likelihood of getting the funding needed to complete projects.
Ennis’ rate was upgraded based on the following reasons: a strong ad valorem tax base, growth to $1.2 billion in fiscal year 2009, a reduced tax rate for the city and adequate reserve funds available to help insure the bonds will be paid back.
Mayor Russell Thomas said he is very excited about the higher rating and credits many people for the improvement.
“I am very excited about the increase; I think it is an accolade for the city,” he said. “I believe this indicates how well the city has performed and is a credit to City Manager Steve Howerton, City Secretary Shirley Trull and the Commission for voting to keep expenditures down and not take on debt until the economy turns around.”
The city had planned a street improvement project that they have put on hold until a rise in the economy is seen and Thomas feels that it is this level of preparedness that has kept the city in a good position when others are not and that helped the city get the upgrade in rating.
“We have to be prepared for tough times and I think the city has worked hard to make sure we are as prepared as possible to meet any challenges that lie ahead,” Thomas said. “It is our job to be fiscally conservative and do what we can to make sure the city is sitting in a good position. I think putting the project on hold was the appropriate thing to do rather than strapping the city with debt and the upgrade in our rating proves that we are being proactive in what we do.”
Standard & Poor’s Ratings Services has raised the ratings on the general obligation bonds of 26 municipalities primarily in Texas, as well as Alabama, Tennessee and Kansas, based on a qualitative assessment in conjunction with credit ratio analysis.
According to S&P’s Web site, there are three levels of rating for the bond issuance. The company states that the highest level is AAA, which identifies the debtor as the best quality borrowers, reliable and stable. These are usually issued to governments.
The A rating is stated as meaning that an economic situation can affect finance.
Intermediate ratings are offered at each level between AA and CCC, which is why Ennis can receive its A+ rating.

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Posted by on Feb 20 2009. Filed under News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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