El Paso general obligation bonds gain AA+ rating from KBRA, outlook remains stable
El Paso enters the 2026 bond market with a new AA+ rating on its general obligation refunding and improvement bonds as the city maintains a stable credit outlook. The rating action also keeps the same AA+ assessment on the city's outstanding general obligation bonds and combination tax and revenue certificates of obligation.
Highlights
- KBRA assigned AA+ rating with stable outlook to City of El Paso, Texas General Obligation Refunding and Improvement Bonds, Series 2026, and affirmed the rating on related debt.
- El Paso's unassigned and committed general fund balances stand at 21.7% of expenditures for fiscal year-end 2025, providing a substantial operating cushion per KBRA.
- KBRA cites weaker per capita income, educational attainment, and moderately high debt burden as ongoing constraints, noting no near-term upgrade expected without major socioeconomic improvements.
2026 bond rating and credit drivers
As reported by Kroll Bond Rating Agency, the AA+ rating applies to the City of El Paso, Texas General Obligation Refunding and Improvement Bonds, Series 2026, while the agency also affirms AA+ ratings on related outstanding city debt. KBRA says the outlook is stable, pointing to reserve levels and pension funding progress as key supports for the credit profile.The agency highlights total unassigned and committed general fund balances equal to 21.7% of expenditures as of fiscal year-end 2025, which it says provides a large operating cushion. KBRA also says strong pension funding progress and modest other post-employment benefit, or OPEB, obligations help moderate the city's fixed-cost pressures.
Constraints and factors that could shift ratings
KBRA identifies weaker per capita income and educational attainment as continuing constraints on the city's credit quality. It also says El Paso carries a moderately high debt burden, while population and employment growth have lagged Texas and the U.S. over the past decade.For a potential upgrade, KBRA says a significant convergence of socioeconomic characteristics toward the state average would be needed, though it does not anticipate that in the near term. For a downgrade, the agency points to a significant and sustained deterioration in taxable assessed value, or an erosion in reserves and unrestricted liquidity.
KBRA’s Q2 2026 U.S. credit outlook highlighted how recovering spreads and still-elevated yields are being supported by resilient growth and corporate earnings. Our publication previously noted that inflation risks, geopolitical tensions in the Middle East, and commodity-driven cost pressures could still test more vulnerable consumers and businesses, even if the base case avoids a broader credit-cycle downturn.
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