The bonds will be sold directly to local investors during the week of
Fitch also affirms the following ratings on the city's outstanding debt:
The Rating Outlook is Stable.
GOULT bonds of the city are secured by an unlimited annual property tax levy. COPs are secured by lease revenue payments from general revenues, subject to annual appropriation. The essentiality of the leased assets provides additional security.
The series 2003A excise tax revenue bonds are secured by
KEY RATING DRIVERS
LARGE ECONOMIC BASE:
IMPROVED FINANCIAL POSITION: Prudent financial management enabled the city to expand its financial reserves amidst a recovering revenue environment. Fitch views positively the city's successful ballot measure to increase its annual revenue growth flexibility, which is part of the city's efforts to sustain long term structural balance.
COMMUNITY SUPPORT: The city benefits from strong voter support for the city's large bond program, property tax levy increases for capital maintenance, and the permanent waiver of property tax revenue limitations.
SOUND REPAYMENT SECURITY: The COPs legal provisions are sound and provide a strong incentive to annually appropriate base rental payments.
HIGH COVERAGE OF HEAD/SEAT TAX BONDS: The 2003 excise tax revenue bonds are characterized by very high debt service coverage (DSC) and broad-based dominant pledged revenues (head taxes) balanced against a weak additional bonds test (ABT).
NARROW REVENUE PLEDGE BUT SOLID COVERAGE: The 2005A and 2009A-B excise tax revenue bonds have a narrower revenue pledge than the series 2003 bonds but have benefited from solid DSC.
SHIFT IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics including the city's strong financial management practices. The city's history of reserve adequacy and sound financial management practices suggest continued rating stability.
FAVORABLE LONG-TERM ECONOMIC PROSPECTS
The city's economic diversity benefits from its role as the hub of a 10-county metropolitan statistical area (MSA) and the capital of
Taxable values are stabilizing after declining by a moderate cumulative 10.4% over 2011-2013. The assessed value for 2014, which is a reassessment year, rose by 4.7%, attributed mostly to reappraisal gains. New construction activity has started to rebound and has been fueled by ongoing redevelopment throughout the city and substantial public and private investment in the downtown area. New construction projects include the massive
PRUDENT RESPONSE TO RECESSIONARY IMPACT ON LARGEST REVENUE SOURCE
The city's financial profile remains sound due to management's notable efforts to curb expenditures in the wake of recessionary pressures on the city's largest revenue source - sales and use taxes. This revenue stream, which comprises about 50% of general fund revenues, declined by a steep 10% in 2009. This led to a multi-year effort to reduce spending by closing annual budget gaps averaging
PERMANENT WAIVER OF PROPERTY TAX REVENUE LIMITATIONS
Fitch favorably views the city's successful
Aided by the waiver, unaudited 2013 results point to a large
The 2014 budget was adopted with an
GROWING BUT MANAGEABLE DEBT BURDEN
Overall debt levels are high at
COPs comprise a manageable 27% of the city's debt and are secured by sound legal provisions along with a strong incentive to annually appropriate base rental payments as the leased assets are considered essential. A moderate 15.8% of the city's general government debt is comprised of variable rate demand obligation COPs, all of which are hedged with swaps. Fitch considers the swaps' termination risk as manageable given the low rating threshold required of the city and its counterparties.
STRONG COVERAGE BY EXCISE TAXES
The series 2003 excise tax revenue bonds continue to benefit from very high debt service coverage despite recent declines in pledged revenues. Such revenues are comprised of the broad-based head tax on all employees and employers within the city, and the narrower seat tax, both of which have rebounded after declining notably in 2009. Coverage of maximum annual debt service (MADS) by 2013 pledged revenues totals a very high 17.4x.
MADS coverage by 2013 head tax revenues alone, which Fitch views to be a more stable source of security, totals a still high 14.6x. Additionally, Fitch notes the bonds have a level debt service schedule and fully mature in 2015. Management reports that an undetermined amount of additional leveraging may be considered as part of its annual capital improvement plan (CIP) update. Any additional debt would require voter approval.
The series 2005A and 2009A-B excise tax revenue bonds also exhibit solid debt service coverage at 2.1x in 2013. But Fitch notes the narrow nature of these pledged excise taxes, making them more vulnerable to economic swings. The lodger's tax makes up 51% of pledged revenue followed by the rental car tax at 32% and the food and beverage tax at 25%. Total pledged revenues declined by nearly 14% in 2009 before rebounding with annual gains through 2013. The bonds are structured with level debt service and all bonds mature within 10 years. The city also reports an undetermined amount of additional leveraging for this security may be considered in future CIP updates. Any additional debt would require voter approval.
ADEQUATELY FUNDED PENSIONS
The funded position of the city's pension for its non-fire and police personnel is satisfactory. Similarly, the state's pension plans for fire and police personnel are adequately funded. The city's modest other post-employment benefit (OPEB) liability is an implicit rate subsidy, funded on a pay-as-you-go basis. Total carrying costs for debt service, pension, and OPEB totaled a moderate 15.8 % of governmental spending in 2012.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was informed by information from CreditScope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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