Fitch U.S. Muni Surveillance: Boulder Central Area General Improv Dist, Colorado Upgraded to 'A'

NEW YORK--(BUSINESS WIRE)--In the course of routine surveillance, Fitch Ratings has upgraded the City of Boulder Central Area General Improvement District's (CAGID or district) approximately $19.1 million of outstanding general obligation bonds to 'A' from 'A-'. The bonds are secured by certain pledged revenues, including parking garage user fees; incremental property, sales, and accommodation taxes; street meters fees; and rental income. The bonds are additionally secured by a pledge of the CAGID's full faith and credit, consisting of an unlimited ad valorem tax on all taxable property within the district. The Rating Outlook is Stable.

The rating upgrade to 'A' from 'A-' reflects the district's stronger-than-projected revenues since calendar 2003, recent efforts to boost pay-as-you-go capital spending, improved debt ratios, and strengthened occupancy rates. Actual revenues from 2005-2007 exceeded projections by an annual average of one-fifth. Spending has likewise exceeded projections, but officials note that most of the increase has been for capital projects that will extend the useful life of the district's facilities; the district fully retired its series 2002 bonds in 2007, which also allowed it to boost its capital spending. The district's $1.4 million unrestricted fund balance, which is projected to grow in future years, provides added flexibility.

General credit strengths include the district's backup pledge of unlimited ad valorem property taxes and healthy tax base growth, as well as sound demand for CAGID parking services, which is evidenced by a waiting list of approximately 832 spaces. City oversight and management is also a positive consideration. Credit weaknesses include the highly concentrated tax base of this small urban district and the potential for weakness in the retail sector, given the broader economic downturn.

The CAGID is a 30-block district in downtown Boulder that operates nine off-street parking facilities and 810 on-street metered parking spaces. Officials have increased parking rates in recent years, and periodic future increases are anticipated. Overall net debt fell from 28% of taxable assessed value in 2003 to a still high 16% currently. However, the debt burden on the tax base should remain manageable, as parking revenues cover most district expenses and part of debt service and the resolution authorizing the series 2003 bonds prohibits the issuance of additional bonds backed by the pledged revenues.

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'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.

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