The tax-exempt public improvement bonds, COs, and PPFCOs are scheduled for negotiated sale on
In addition, Fitch affirms the following ratings for the city:
The Rating Outlook is Stable.
The public improvement bonds, COs, and PPFCOs are direct obligations of the city and secured by an ad valorem tax limited to
The COs are secured further by a limited pledge (not to exceed
The corporation contract revenue bonds are secured by a first lien on pledged revenues pursuant to a grant agreement with the city of
KEY RATING DRIVERS
SOUND FINANCIAL PROFILE: The city maintains a balanced operating profile while using cash in excess of fiscal targets for non-recurring and capital initiatives. Recent gains in economically sensitive revenues have contributed to operating surpluses and expanding reserves and liquidity. Likely continued economic expansion should allow the city to maintain a sound financial profile while addressing growing service needs.
VIBRANT, DYNAMIC ECONOMY: The city's economy is diverse and growing steadily, with government, higher education, healthcare and high technology the primary employment sectors. The city continues its strong post-recession performance, as reflected in healthy job and population gains. Wealth levels are good, the labor force is highly educated, unemployment is low, and taxable values are climbing at a healthy pace.
UNDERFUNDED RETIREE LIABILITIES: City pension costs have been increasing primarily to address the underfunded position of the city's civilian pension program. The city recently reached full annual required contribution (ARC) funding for this program, and recent benefit adjustments are expected to stabilize the city's pension burden over the long term. The city has not addressed a sizable other post-employment benefit (OPEB) liability.
MODERATE DEBT PROFILE:
MUELLER LGC BOND RATING: The rating of the Mueller LGC contract revenue bonds is one notch below the city's 'AAA' limited tax general obligation (LTGO) rating to reflect annual appropriation risk.
FOCUS ON RETIREE LIABILITIES: The city has demonstrated its willingness to address its underfunded civilian pension. Continued progress in improving pension funding levels and addressing the sustainability of OPEB obligations will be important credit considerations looking forward.
HEALTHY AND EXPANDING ECONOMY
Technology manufacturing is another key area employment sector, led by Dell, IBM, Samsung and others. The city's highly educated workforce and availability of major research facilities continues to attract and support expansion of technology firms.
Tourism has also become a growing economic player. The city hosts several festivals and conferences for music and technology throughout the year, which continue to increase in visitor count. More recently the city has added high-profile sporting events to its roster of events, including Formula One auto racing and the ESPN Summer X Games. Airport traffic continues to grow, with 2013 recording a record 10 million-passenger total, and construction is underway at the airport on a terminal expansion and new parking and rental car facility.
STRONG JOB AND TAX-BASE GAINS
Job gains over the past 12 months equaled a strong 3.5%, outpacing the 2.1% growth in the labor force. Correspondingly, the city's
Taxable values have resumed solid growth following a one-year decline in fiscal 2011. Increases the past three fiscal years have brought taxable assessed value (TAV) to
Development continues at Mueller, a mixed-use project located at the city's old airport location. Increasing retail activity boosted sales tax receipts to more than
SOUND FINANCIAL PROFILE
The general fund produced operating surpluses (after transfers) in four of the last five fiscal years, as property tax and sales tax revenues (the two leading general fund revenue sources) demonstrated impressive growth and management controlled spending. The surpluses increased fund balance by more than 50% during this period.
The city concluded fiscal 2013 with an operating surplus (after transfers) of nearly
The city prudently adheres to its fund balance reserve targets which, by policy, include within the unrestricted fund balance a
DIVERSE GENERAL FUND REVENUES
Property taxes and sales taxes made up 40% and 23% of general fund revenues and transfers-in, respectively, in fiscal 2013. Property tax revenues have averaged a robust 11% annual growth since fiscal 2008. Growth has been supported by the climbing TAV and council approval of tax rate increases. Sales taxes recovered from a recessionary dip of nearly 10% in fiscal 2009, registering solid gains in each succeeding year. Receipts surged 8.6% in fiscal 2012 and 7.3% in fiscal 2013 (
Dividends from the city-owned electric utility and water and sewer system are also a significant revenue source, representing 22% of fiscal 2013 general fund revenues. The transfers are formalized by city policy and equal 12% of the electric utility's nonfuel revenues (with a floor of
PROJECTIONS CALL FOR FURTHER GAINS IN FISCAL 2014
Preliminary general fund estimates for fiscal 2014 indicate another healthy surplus of more than
PENSION FUNDING LEVELS WEAK BUT STABILIZING
The city maintains three single-employer pension programs for civilian, police, and fire retirees. Fitch considers the civilian and police plans to be underfunded. When adjusted to assume a more conservative 7% investment return, the funding levels for the civilian and police programs are below average at roughly 60% each. The fire pension program is stronger at 80% funded (adjusted). The funded ratios of all three plans have declined since 2008 due to the smoothing in of investment losses incurred during the market downturn and the city's underfunding of its ARC for the civilian plan.
The city's contributions to the civilian plan increased to 18% of payroll in fiscal 2013 from 8% in fiscal 2005 as part of a city-initiated supplemental funding plan. Additionally, management extended the years of service requirement for new civilian employees hired after
The city's unfunded OPEB liability totals
MANAGEABLE DEBT BURDEN AND CAPITAL PLAN
The city's overall debt metrics remain moderate at 3.4% of market value and
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported RatingCriteria, this action was additionally informed by information from Creditscope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
U.S. Local Government Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria - Effective
Source: Fitch Ratings
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