Fitch Rtes Terrebonne Parish, Louisiana $5MM GOs 'A+' & $9.85MM PIBs 'A+'

AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings assigns an 'A+' rating to the $5 million general obligation (GO) bonds, series 2008, and $9.85 million public improvement sales tax bonds (PIBs), series ST-2008 of Terrebonne Parish, Louisiana (the parish). Additionally, Fitch affirms the 'A+' rating on the $18.7 million in parish GO bonds and the $23.6 million in PIBs outstanding. Both series of bonds are scheduled to sell on October 8th via competitive bid. Fiscal Services, Inc. in New Orleans is financial advisor to the parish. The Rating Outlook is Stable.

The GO bonds are secured by an unlimited property tax levied against all taxable property in the parish. Proceeds will finance various sewer system improvements. The public improvement sales tax bonds are secured by 1/3 of 1% of the parish general sales and use tax and 1/4 of 1% of a separate capital improvements sales and use tax. Proceeds from the public improvement bonds will finance road and levee improvements within the parish.

The 'A+' GO rating is based on the low property-tax-supported debt levels, strong general fund balances, a stable and growing tax base with an oil and gas concentration, and consistently solid financial results. The 'A+' rating on the PIBs reflects steady growth in sales tax receipts in recent years and healthy debt service coverage provided by the pledged revenues.

Despite the strength of the parish's financial results, it has historically been somewhat dependent on sales tax receipts and state royalty payments. The parish has been able to maintain a strong financial position despite hurricanes Gustav and Ike, which caused approximately $5 million in estimated damages within the parish. Parish officials anticipate reimbursement of most if not all of hurricane recovery and repair expenses from federal and state assistance. Recent financial performance suggests the parish will be able to maintain its financial profile satisfactorily over the near term.

The parish is located on the Gulf of Mexico in southern Louisiana, 50 miles southwest of New Orleans, with approximately 110,000 residents in 2007 according to the Census Bureau; this number represents a modest population gain since 2000. It is the second largest parish in the state at approximately 2,080 square miles, although a sizable portion has been lost due to coastal erosion, and land area of the parish continues to diminish annually. The parish is a consolidated government created in 1984 through the merger of the City of Houma and the Terrebonne Parish Police Jury. Major industries within the parish include oil/gas production, oilfield services and fabrication, commercial fishing, marine transportation, and shipbuilding.

The tax base has demonstrated steady, stable growth over the past five years at an average annual rate of 8.3%. The top 10 tax payers contribute an above-average 17% of the total assessed valuation with nine entities in this category representing oil/gas and related industries. Parish officials indicate that additional retail and commercial projects are in various stages of planning and construction, particularly in both West and Northern Houma.

While the general fund provides for the basic service delivery for the parish, several essential services are recorded in separate funds. The general fund provides support to several of these funds, including the public safety fund, road and bridge fund, civic center fund, and capital projects fund. Conservative revenue estimating and prudent use of one-time revenues led to positive financial performance through fiscal 2006, with ending general fund balances of $20.4 million, or 75.3% of expenditures and transfers out. In fiscal 2007, the parish reported a $2.4 million deficit due to lower mineral valuation payments from the state, higher general government expenses related to inspection and permit costs, and some non-recurring capital project transfers. The parish has a policy of not spending funds on projects until it collects the funds/surplus. The fiscal 2007 deficit was due to funding for projects from the surplus that had been collected in the prior fiscal year. The general fund ended 2007 with a sizeable unreserved, fund balance of $16.8 million or more than 50% of expenditures and transfers out.

The parish expects fiscal 2008 results to be similar to fiscal 2007 results, although sales tax revenues are above budget year to date. In addition, the parish maintains a dedicated emergency fund that maintains a $4 million balance, which is not included in the general fund balance.

This GO issuance is the final installment of a $20 million GO bond authorization approved by voters in November 2004. The tax rate required to support repayment of the entire authorization and the parish's outstanding GO bonds is expected to increase by a modest .82 mills. Currently, amortization of property-tax-supported debt is slightly above average with 55% retired in 10 years.

The direct debt burden is low at 1.1% of market value and direct debt per capita is slightly more than $600. Although property-tax-supported debt is modest, the use of sales-tax-secured debt financing has been utilized significantly over the past decade through incremental voter-approved dedicated sales tax propositions. Based on 2007 pledged revenues totaling $14 million, projected maximum annual debt service coverage (including both outstanding debt and the series 2008 bonds) approximates a healthy 4 times.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.)

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