The Rating Outlook is Stable.
The 2013A bonds are secured by an unlimited annual property tax levy on all property located within the original boundaries of the district.
KEY RATING DRIVERS
HIGH CONCENTRATION; LIMITED BASE: The district's tax base is highly concentrated which is not unusual for limited purpose special districts. Ongoing construction and future development is not projected to reduce concentration due to the small geographic size of the district.
DOWNTOWN DEVELOPMENT BOOM: The district encompasses one of
MANAGEABLE TAX INCREASES ASSUMED: While Fitch believes development in the district is likely to continue, its base case includes only the value of existing properties. Tax rate increases needed to meet ascending debt service in this scenario, assuming no substantial further tax base declines, are steep but of a magnitude Fitch believes would be manageable.
MODERATE AV DECLINES: Substantial new construction has enabled the district to more than recoup recessionary assessed value (AV) losses. Recent and ongoing building activity should ensure a positive trajectory for the district's taxable values through 2016.
HIGH DEBT; ASCENDING DEBT SERVICE: Overall debt is high relative to market value and is amortized slowly. The completion of all infrastructure and lack of future debt plans should allow these metrics to improve slowly over time assuming at least modest tax base growth.
SUSTAINED TAX BASE LOSSES: Large and sustained tax base losses could lead to negative rating pressure.
CONCENTRATION LIMITS UPWARD MOVEMENT: The very high tax base concentration limits upward rating potential even with potential significant tax base improvement.
RESIDENTIAL DOMINATES ORIGINAL DISTRICT
The original boundaries of the district, encompassing a modest 63 acres, consist primarily of residential apartment buildings and condominiums, totaling 43% of 2014 AV. These properties contain a total of 895 completed and sold condominiums and almost 1,700 apartments that are estimated to be 93% occupied. Commercial office buildings comprise 40% of AV. Most of the remaining AV is composed of vacant land parcels (13% of AV) and nearly all are planned as commercial office properties.
HIGH TAX BASE CONCENTRATION
Although Fitch notes that
MIXED GOVERNING BOARD
The district's five-member governing board includes two members affiliated with current developers,
HIGH DEBT BUT NO ANTICIPATED FURTHER NEEDS
Overall debt per market value is high at 9% which is not unusual for a limited purpose special district. Fitch notes that all infrastructure is in place for future development, precluding the need for any future debt. Additionally, the district does not owe the developer for any advances or reimbursements, enhancing its operating flexibility. Payout is structured with ascending debt service and only 22% of aggregate principal is retired in 10 years.
The AV of the operating district, a subset of the original boundaries of the district, secures a non-Fitch-rated variable rate
MILLAGE GOAL DEPENDENT ON AGGRESSIVE EXPANSION
It's the district's goal to maintain level mill rates for debt service for the first several years to provide sum sufficient coverage of ascending annual debt service. Such a goal would require continued large AV gains which Fitch considers aggressive. However, substantial development is currently underway throughout the district. Properties completed in time for the 2015 collection year include three large residential apartment complexes (with project costs ranging from
ANALYSIS DOES NOT ASSUME FUTURE AV GROWTH
Beyond the projects that have been completed, Fitch notes the difficulty in projecting future tax base and development trends. For this reason, Fitch's base case assumes AV remains flat at the fiscal 2014 level. In this scenario, due to an ascending debt service schedule, which increases by a compound annual average of 8% from 2015-2019, the original district's aggregate debt service mill levy would need to increase by a large 79% from the current level of 16 mills to 28.7 mills by fiscal 2019. Although this represents a steep increase, it's below past mill levy rates of over 40 mills. In addition to having an unlimited tax pledge, Fitch notes that the debt service fund balance currently totals
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
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