The Rating Outlook is Stable.
The assessment bonds are secured by special assessments levied and collected in the affected area, and by a covenant to pay debt service from net revenues of the water and sewer utility system after payment of senior and subordinate (state loans) obligations. The bonds are also secured by a surety-funded debt service reserve fund.
KEY RATING DRIVERS
BACK-UP PLEDGE: The key credit strength is the city's covenant to use net revenues of the city's water and sewer system (the system), on a super-subordinate basis, to make up any shortfall in debt service payments on outstanding assessment bonds. Assessments alone do not in all cases fully cover debt service.
IMPROVED UTILITY SYSTEM PERFORMANCE: The system's financial profile has strengthened in recent years due to user rate increases and an improving economy, providing adequate capacity to cover any potential debt service deficiencies on special assessment bonds. Fitch rates the system's utility bonds 'A'.
LIMITED COVERAGE: Special assessments are levied in small geographic areas and are structured to provide narrow annual debt service (ADS) coverage on outstanding bonds, leaving little margin for non-collection. Historical collections have been satisfactory in most years, although certain areas have had to utilize accumulated excess assessment revenues to meet annual debt service obligations.
TAX LIEN PROVIDES INCENTIVE: Special assessments are included as a line item on the property tax bill with nonpayment resulting in a property tax lien on parity with those related to ad valorem tax delinquencies.
ECONOMIC PRESSURES SUBSIDING: The city continues to face challenges as a result of the housing crisis, but aspects of the economy are showing signs of improvement with area labor and housing prices showing improvement.
UTILITY CREDIT QUALITY: The rating relies heavily on the system's ability to cover shortfalls in special assessments. A change in system credit quality would likely impact the rating on special assessment bonds.
For additional information on the city's special assessment bonds and the system, see the following Fitch Rating Action Commentaries:
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, S&P/Case-Shiller Home Price Index, and
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
--'Revenue-Supported Rating Criteria' (
--'Water and Sewer Revenue Bond Rating Guidelines' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Revenue-Supported Rating Criteria
U.S. Water and Sewer Revenue Bond Rating Criteria
Source: Fitch Ratings
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