OREANDA-NEWS. S&P Global Ratings has revised its outlook on the Town of Northlake, Texas' general obligation (GO) bonds to positive from stable and affirmed its 'A+' rating on the town's GO debt outstanding.

"The positive outlook reflects our view of the town's fund balance, which has tripled over the past three years, and we believe Northlake's taxable values will continue to grow, which will help the local economy diversify," said S&P Global Ratings credit analyst Ann Richardson.

At the same time, S&P Global Ratings assigned its 'A+' rating and positive outlook to the town's series 2016 GO refunding bonds and series 2016 certificates of obligation.

The series 2016 GO refunding bonds are payable from an ad valorem tax, levied within the limits prescribed by law, on all taxable property in the town. The maximum allowable 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 town's levy is well below the maximum, at 29.5 cents, 7.7 cents of which is dedicated to debt service. We do not differentiate between the limited tax pledge and the town's general obligation given the significant financial flexibility. We understand that proceeds from the sale of the bonds will be used to refund a portion of the town's debt outstanding for debt service savings.

The certificates constitute direct obligations of the town, payable from a combination of the levy and collection of a continuing annual ad valorem tax, within the limits prescribed by law, on all taxable property within the town, and a limited pledge (not to exceed $1,000) of surplus net revenues of Northlake's waterworks and sewer system. Despite the dual pledge, we rate the series 2016 certificates based on the strength of the town's GO profile. We understand that proceeds from the sale of the certificates will also be used for general capital purposes.

Northlake's existing certificates of obligation bonds are similarly secured by a direct and continuing ad valorem tax, within the limits prescribed by law, and by a various pledges of net utility system and special assessments within a public improvement district. We rate these debt series to the strength of our GO rating on Northlake.

The rating reflects our assessment of the following factors for the town:Adequate economy, with access to a broad and diverse metropolitan statistical area (MSA), yet a concentrated local tax base; Adequate management, with "standard" financial policies and practices under our financial management assessment (FMA) methodology; Strong budgetary performance, with operating surpluses in the general fund and at the total governmental fund level in fiscal 2015; Very strong budgetary flexibility, with an available fund balance in fiscal 2015 of 52% of operating expenditures; Very strong liquidity, with total government available cash at 48.5% of total governmental fund expenditures and 3.1x governmental debt service, and access to external liquidity we consider strong; Very weak debt and contingent liability position, with debt service carrying charges at 15.6% of expenditures and net direct debt that is 308.1% of total governmental fund revenue, as well as high overall net debt at greater than 10% of market value; and Strong institutional framework score. The positive outlook reflects our opinion that there is at least a one-in-three chance that we could raise the rating within our two-year outlook horizon. If Northlake's economy continued to significantly grow and diversify over the next two years, such that its tax base became less concentrated and overall net debt as a percent of market value declined, we could consider a higher rating. We could also consider a higher rating if management is able to demonstrate its ability to plan for future capital needs by adopting policies and financial plans we view as most likely to affect Northlake's credit quality. However, if the town's economy remains very concentrated, and overall net debt stays above 10% of market value, we could revise the outlook back to stable.