Ratings based on strength of debt service and economic outlook
The City of McAllen and the McAllen Development Corporation recently went before S&P Global Ratings for review on its upcoming bond series and received a rating of ‘AAA,’ viewing “the outlook for this rating as stable.” The bond, set for $5.135 million, was for the construction and development of parking garages for La Plaza Mall.
“This rating reflects not only the strength of our retail economy here in McAllen, but also, the impact it has and will continue to have throughout the Rio Grande Valley,” said City of McAllen Mayor Jim Darling. “This demonstrates that this area of South Texas is stable and prosperous.”
According to the rationale provided by the financial rating agency, “S&P Global Ratings assigned its ‘AAA’ rating and stable outlook to the McAllen Economic Develop Cor., Texas’ series 2017A sales tax revenue bonds and affirmed its ‘AAA’ rating, with a stable outlook, on the corporation’s parity sales tax debt.”
Additionally, S&P Global Ratings affirmed the McAllen Local Government Finance Corp.’s ‘AA+’ rating, with a stable outlook, for the 2017 contract revenue bonds series.
The ratings were based on the following judgement by S&P of both corporations’ very strong maximum annual debt service coverage requirement of senior and subordinate-lien debt. The letter further stated: “The city of McAllen’s role as a regional economic center in the Rio Grande Valley, resulting in very strong per capita retails sales,” was also a factor in determining their ‘AAA’ rating.
The stable outlook reflects S&P Global Ratings’ opinion that it will not likely change the ratings over the two-year outlook period. Part of that opinion comes from McAllen’s role in facilitating and developing international trade between the U.S., which has helped to fuel the city’s growth. “We believe McAllen’s low cost of doing business, geographical advantages that benefit from binational trade with Mexico, and access to an increasingly skilled labor force will likely continue to contribute to a stable economy.
City Manager Roel “Roy” Rodriguez, P.E., was extremely pleased with the bond ratings, stating that the rating was also indicative of the fiscally responsible and conservative approach that the City of McAllen has maintained in managing the city’s finances and investments, incurring debt slowly and developing a healthy fund balance.