Texas Comptroller of Public Accounts

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News Release from Comptroller Susan Combs

For Immediate Release
August 12, 2009

Fiscal Strength Attracts Best Ratings for Texas Notes

(AUSTIN) — Impressed that Texas has performed better than other states through tough economic times, Wall Street bond raters have given their highest marks to $5.5 billion in short-term Tax and Revenue Anticipation Notes (TRANs), which the state will sell on Aug. 25.

“Texas is in an enviable position,” Texas Comptroller Susan Combs said.  “Certainly, our economy has slowed, but our housing market and business community are not as hard-hit as other states.  And our state government continues its commitment to be fiscally responsible by spending taxpayer dollars wisely.  This commitment is reflected in the bond rating firms’ confidence that Texas TRAN notes are a solid investment.”

Texas’ 2009 Series TRANs are rated SP-1+ by Standard & Poor’s, MIG 1 by Moody’s Investors Service and F1+ by Fitch Inc.

Standard & Poor’s assigned its highest rating to the Texas TRANs “based on what we consider the state’s strong credit factors, including the state’s AA+  long-term [General Obligation bond] rating; adequate estimated debt service coverage…from general cash alone; early set aside of TRAN repayments; and additional liquidity, provided by significant borrowable internal resources.”

Moody’s said, “The highest grade note rating reflects the state’s projection of sufficient ending cash balances in its General Revenue Fund and ample alternate liquidity to repay noteholders at maturity.  Additional strengths include the state’s history of successful short-term borrowing, conservative revenue forecasting, strong cash management procedures and the state Comptroller’s ability to hold back spending in the event of revenue shortfalls.”

In granting its highest rating, Fitch noted, “The F1+ rating reflects sound legal protections from set-asides, good coverage for each set-aside payment, substantial borrowable resources and a history of conservative economic and revenue assumptions.  These factors offset risks associated with a sales tax dependent revenue structure, the current recession-related slowing of revenues and longer-term pressures from the state’s expanded responsibility for education funding.”

For more than two decades, Texas has used short-term TRAN notes to manage its cash flow between the Sept. 1 start of the fiscal year and the arrival of tax revenues later in the year.

“Our biggest financial obligation is to distribute state funding to public schools early in the school year,” Combs said.  “Even in these times, Texas school districts can be certain their state funding will arrive on schedule, as usual.”

The TRAN sale will take place Tuesday, Aug. 25, from 9–10 a.m. CDT at https://www.trantexas.com/pma/. The notes will be repaid on Aug. 31, 2010.


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