Waco’s $125M Tax and Revenue Certificates: A Secure Bet on Infrastructure and Stability

The City of Waco, Texas, is poised to secure $125 million in long-term financing through the issuance of Tax and Revenue Certificates of Obligation Series 2025, marking a significant step toward modernizing its infrastructure and public safety systems. Backed by robust credit ratings and a diversified revenue structure, the offering highlights Waco’s fiscal discipline and strategic vision for growth. Here’s why investors should take note.

Structure and Security: A Dual Revenue Stream

The certificates are structured as a direct obligation of the city, secured by two primary revenue sources: a continuing ad valorem property tax and surplus revenue from the water and sewer system. This dual backing provides a safety net, as property tax revenues remain a stable source of income even during economic fluctuations. The terms are equally compelling: interest accrues from the delivery date, with semiannual payments beginning in early 2026 and a final maturity in 2055. This long duration aligns with the lifecycle of infrastructure projects, ensuring funds are deployed effectively.

Credit Ratings and Financial Strength

With ratings of Aa1 from Moody’s and AA+ from S&P Global, Waco’s certificates signal strong creditworthiness. These high grades reflect the city’s financial management prowess, including its 20-year streak of earning the Government Finance Officers Association’s Distinguished Budget Presentation Award. Notably, Waco’s 2024–2025 tax rate increased by just 0.7%, with homeowners seeing a $9.76 reduction in maintenance taxes on a $100,000 home—a testament to budgetary restraint even as the city invests in capital projects.

The ratings also underscore the stability of Waco’s tax base. With a population of ~146,000 and proximity to Baylor University, the city benefits from a growing, diverse economy. shows that Aa1 securities typically offer tighter spreads, reducing risk for investors.

Projects Funded: Prioritizing Safety and Sustainability

The $125 million will support critical projects:
- Public Safety: Upgrades to police facilities and firefighting equipment.
- Infrastructure: Water system improvements, sewer system repairs, and transportation projects.
- Operational Efficiency: Funding issuance costs while maintaining fiscal transparency.

These investments align with Waco’s capital improvement plans, which emphasize resilience. For example, water system upgrades address aging infrastructure, while transportation projects aim to alleviate congestion—a key driver of economic vitality.

Market Context: A Stable Investment in a Growing Region

Waco’s offering sits within a broader trend of municipal issuances tied to infrastructure. The city’s conservative fiscal policies contrast with some jurisdictions facing budgetary strains, making it an outlier in stability. Its lead manager, RBC Capital Markets, adds credibility, given its expertise in structured municipal deals.

Moreover, the certificates’ semiannual payments and 30-year maturity provide investors with steady income and liquidity flexibility. For those seeking tax-exempt returns, the structure offers an attractive alternative to volatile equities or short-term bonds.

Conclusion: A Prudent Investment in a Strong Credit

Waco’s Tax and Revenue Certificates present a compelling opportunity for fixed-income investors. With Aa1/AA+ ratings, a dual revenue pledge, and a track record of prudent financial management, the offering combines safety with long-term growth potential. The city’s focus on public safety and infrastructure upgrades not only supports its residents but also bolsters its economic trajectory.

Key data points reinforce this outlook:
- Credit Ratings: Waco’s Aa1/AA+ rankings place it among the top 10% of municipal issuers.
- Fiscal Discipline: A 0.7% tax rate increase contrasts with national averages, indicating fiscal restraint.
- Lead Manager Credibility: RBC’s role underscores investor confidence in the deal’s execution.

In a market seeking stability, Waco’s certificates are a rare blend of security, yield, and purpose—a prudent choice for portfolios navigating uncertain economic waters.