Small Texas city gets big bond rating boost from S&P

S&P Global Ratings gave Graham, Texas, a three-notch rating upgrade on Tuesday to A from BBB, citing "significant" financial improvement the city achieved ahead of schedule.

The higher rating and a positive outlook cover outstanding general obligation bonds and certificates of obligation, as well as an upcoming debt issuance by the city of about 8,000 west of the Dallas-Fort Worth region.

"The rating reflects our view of the significant turnaround in the city's financial performance, buoyed by implementation of multiyear financial forecasting and budget monitoring, as well as property tax rate increases," S&P's rating report said. "Following a decade of negative general fund available balances, the city has rapidly increased reserves to $2.7 million at the end of fiscal 2025 from approximately negative $607,000 in fiscal 2021."

S&P pointed to Graham's role as a rural north Texas economic center and its adoption of a minimum reserve balance requirement, along with the creation of a five-year financial forecast, a six-year capital improvement program, and special revenue funds for its airport, library, and arena.

"The positive outlook reflects a one-in-three chance we would raise the rating if the structural changes to financial management practices continue to support positive financial performance and reserves comparable with those of higher-rated peers, which would improve our view of the city's governance structure under our criteria," the rating agency said.

City Manager Eric Garretty attributed the upgrade to "sound financial practices and policies, absolute financial transparency, citizen support and engagement, and exemplary leadership by the city council," according to a statement.

Graham had $8.8 million of GO bonds and $4.32 million of certificates of obligation outstanding as of Sept. 30, according to its fiscal 2025 annual financial audit.

The city expects to sell $14 million of combination tax and revenue certificates of obligation next week through BOK Financial Services and Piper Sandler (PIPR) with Hilltop Securities as municipal advisor. Proceeds are earmarked for a wastewater treatment plant renovation project and the acquisition of fire apparatus.