Fitch Upgrades Parker, Colorado's Sales Tax Bonds to 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--As part of ongoing surveillance, Fitch Ratings has upgraded its rating to 'AA-' from 'A+' on $14.6 million of sales and use tax revenue bonds, series 2006 (the bonds) issued by the Town of Parker, Colorado (the town). The Rating Outlook is Stable.

The bonds are payable from the levy of a 2.5% sales and use tax. Sales tax revenue comprises approximately 95% of the pledged revenue stream; use taxes are collected on construction-related activity only as the town does not have a general use tax.

The upgrade reflects the robust coverage of maximum annual debt service (MADS) from pledged revenues and the strong linkage that sales and use tax performance shares with the town's overall financial profile and creditworthiness. The 'AA-' rating considers the town's sound fiscal management and large reserve levels, proximity to the broader Denver metro economy, and a highly skilled workforce contributing to low unemployment and above-average wealth. Debt levels have risen but remain manageable and the town reports no additional borrowing or capital needs.

Sales tax revenues through the first nine months of fiscal 2009 are up 2.4% from the year prior due to the opening of a Costco in August 2008. On an annualized basis this growth would result in 8.8 times (x) coverage of MADS for the year. The additional bonds test (ABT) requires 2.5x coverage of MADS, providing strong bondholder protection. In Fitch's view, the likelihood of leveraging to the ABT is remote given the town's dependence on sales tax revenue to fund general government operations. The sales tax base remains highly concentrated though largely within the grocery sector, which Fitch considers less volatile than other retail sectors.

The town projects its unreserved general fund balance will be lower by nearly $600,000 at the close of fiscal 2009, but very strong nonetheless at $14.8 million or 44% of total spending. The town has consistently exceeded its two month reserve policy, as the unreserved portion of the general fund balance has equaled no less than 37% of total spending dating back to fiscal 2000. In Fitch's view, the town's balance sheet resources mitigates risk to downturns in the economy and volatility in sales and use tax collections, which represent a high 69% of total revenues in fiscal 2008. The town also maintains significant resources within various special revenue funds that could be used to support the general fund, if necessary. The recently adopted fiscal 2010 budget does not anticipate a material change in fund balance and shows flat to modest declines year-over-year in most major revenue sources.

Debt levels remain manageable despite the recent sale of $44 million in certificates of participation (COP) (not rated by Fitch) to construct a new police station and civic center. The town reports no major capital needs or debt issuance plans. Debt amortization, once considered a rating strength, is now below average as the COP issue stretches out the overall repayment schedule. Total debt carrying charges are expected to reach $4.1 million by fiscal 2012 approaching 12% to 13% of total spending and a potential point of budgetary pressure.

Parker is predominantly a residential community located approximately 25 miles southeast of Denver on Highway 83. The town is home to a large number of young families and a well educated and trained workforce employed within managerial, business, and professional occupations throughout the Denver metro area. Above-average income levels and a comparatively low rate of joblessness at 4.2% as of September 2009 indicate a skilled labor force. Once-rapid growth fueled by land annexation and residential development has come to a near halt with the downturn in the economy and housing market. The town's housing market shows signs of weakening but is far from strained with foreclosure and delinquency rates equal to the state average and well below the national average, and a low count of non-traditional loans according to data available to Fitch.

Additional information is available at 'www.fitchratings.com'.

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