In addition, Fitch affirms the city's implied unlimited tax general obligation (ULTGO) rating of 'AA'.
The Rating Outlook is Stable.
The bonds are special and limited obligations of the authority, payable from any lawfully available funds of the city that have not been legally dedicated and required for other purposes. The city's obligation to pay debt service, in the form of a loan repayment to the authority, is absolute and unconditional.
KEY RATING DRIVERS
HEALTHY RESERVE LEVELS: A key rating driver supporting its implied 'AA' ULTGO rating is the city's significant financial cushion, reflected in strong liquidity and reserve levels despite recent draw-downs.
BUDGET CHALLENGES EVIDENT: The general fund's heavy dependence on sales tax revenues, coupled with pension and other spending increases, will likely continue to cause budget challenges in fiscal 2015. The fixed cost burden on the budget for pensions, other post-employment benefits (OPEB), and debt service currently consumes a manageable 12% of the fiscal 2014 budget.
REVENUES IMPROVING: Economically sensitive gaming revenues and sales taxes, the main revenues for repayment of the bonds, each weakened modestly in 2009 and 2010 but have since shown improvement.
MANAGEABLE DEBT: Overall debt ratios are moderate, amortization is above average, and the city's capital plan is manageable. Tax-supported debt plans are minimal although the city reports notable deferred capital needs.
CONCENTRATED ECONOMY BUT REGIONAL HUB; POSITIVE ECONOMIC TRENDS: The city serves as a regional economic hub of southwestern
RATING DISTINCTION: The one-notch differential in the ratings reflects what Fitch believes is a slightly weaker pledge than either a general obligation or a first lien on a specific revenue source. The city has the ability to levy additional taxes for debt service should intended sources be insufficient.
SUSTAINED BUDGETARY IMBALANCE: Fitch is concerned about the city's recent fund balance draws but notes that financial performance has improved and liquidity and reserves remain high. Any material deterioration below the city's 30% fund balance policy could create downward rating pressure given the city's economically sensitive revenue base.
OPERATING RESERVES PROVIDE FINANCIAL CUSHION
The city's unrestricted general fund balance is significant at
CONSERVATIVE BUDGETING AIDS PERFORMANCE
The city outperformed a fiscal 2013 budgeted operating deficit of
The fiscal 2014
MODEST DEFICIT FORECAST IN 2015
The fiscal 2015 budget is again likely to be challenging, as officials expect continued pressure from deferred capital needs and pension costs. The city is currently litigating with police employees over supplemental pay, and settlement is pending. Fitch views the budgetary impact as manageable given the multi-year payout anticipated by city management. The city expects to again meet its formal minimum fund balance policy of 30% of budgeted expenditures and non-capital transfers. An extended trend of budget imbalance would lead Fitch to reconsider the current rating.
STANDBY REVENUES PROVIDE SOME FLEXIBILITY
The city has designated in the covenant resolution primary revenues for the repayment of the series 2007 bonds and series 2010 bonds (not rated by Fitch). Authorized sources include riverboat gaming revenues (of which 60% is allocated for debt service), a 0.28% sales tax levied specifically for capital projects (60% allocated for debt service), and revenues generated from an increase in wastewater rates effective
Voters also approved an additional 0.25% sales tax and 2.5 mills property tax (referred to as the standby revenues) to be levied in the event the primary revenue stream does not appear sufficient in any given year, as determined by an annual coverage calculation during the city's annual budgeting process. Fiscal 2013 MADS coverage from combined primary and standby revenues is a stronger 2.8x. The city maintains approximately
RENEWAL RISK ASSOCIATED WITH PRIMARY REVENUES
There is some risk to governmental funds associated with several of the primary revenues. The sales tax is subject to periodic voter renewal (the last 10-year renewal election was in 2006). In addition, the city maintains an agreement with the
However, officials report that sales tax renewals have historically received strong voter support (the most recent renewal was approved by two-thirds of voters), and at this time there is no indication from the parish that the gaming agreement will not be renewed. Any interruption in the primary revenue flow likely would cause downward pressure on the ratings.
AFFORDABLE DEBT BURDEN
Overall debt levels (city and parish debt) are moderate at
INCREASING BUT STILL MANAGEABLE PENSION COSTS
The city participates in three separate pension programs for municipal employees, police, and firefighters, and each plan's benefits and contributions are set by the state legislature. The city fully funds its actuarially determined required contributions but has seen sharp increases in the required contribution rates due to poor investment returns. Since fiscal 2009, the contribution rate for the police plan has jumped from 11% to 31.5% of payroll, for firefighters from 14% to 29.25%, and for municipal employees from 6.75% to 9.5%.
Despite the increase, pension costs as a share of governmental expenditures are still a reasonable 5% (
IMPROVING ECONOMIC INDICATORS
The city's shrinking labor force and employment count from 2009-2011 mirrored the broader nationwide trend. An improving economic environment has boosted employment figures in the last two years, lowering the
Recent and announced investments by several area refineries and other enterprises are expected to spur employment growth even further; management reports
Gains in taxable values slowed in conjunction with the regional and national economic slowdown as well as the weakened local housing market. Fiscal 2012 TAV was essentially flat, but reappraisal of existing properties for fiscal 2013 contributed to a solid 6.6% growth in the tax base. Further tax base gains are likely given the economic activity underway and scheduled.
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,
--'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
Most Popular Stories
- Homeowners More Satisfied With Mortgage Servicers
- Discounts Help U.S. Auto Sales Sizzle in July
- Russia, Ukraine Now Face Off Over Football Clubs
- Colorado Issuing Immigrant Driver's Licenses
- Recruiting and Keeping the Perfect Employee
- MassMutual Teams Up With ALPFA
- Chrysler U.S. Sales in July Hit 9-Year High
- Fiat Looks Abroad After Chrysler Merger Vote
- Obama Vows to Veto House Immigration Bill
- Dow Wipes Out Gains for the Year: What Happens Now?