AUSTIN, Texas--()--Fitch Ratings has assigned an 'AA-' rating to the following Boulder, Colorado Central Area General Improvement District (CAGID, or the district) general obligation (GO) bonds:
--$8.01 million unlimited tax GO refunding bonds, series 2012.
The bonds are expected to price via negotiation as early as the week of Oct. 23, 2012, pending market conditions. Proceeds from the sale of the bonds will be used to refund a portion of the district's currently outstanding obligations and to pay issuance costs.
In addition, Fitch affirms approximately $15.105 million in outstanding district GO bonds (pre-refunding) at 'AA-'.
The Rating Outlook is Stable.
The bonds are secured by the full faith and credit of CAGID to make payments from all available funds and by unlimited ad valorem taxes on all property located within CAGID boundaries. The unlimited ad valorem tax pledge provides the basis for the 'AA-' rating, although the district has not needed to levy a property tax for debt service.
KEY RATING DRIVERS
DISTRICT FINANCIAL PROFILE STABLE: The district's finances are strong, with a history of balanced budgets and a solid unrestricted fund balance that was approximately 34% (audited) of total expenditures in fiscal 2011.
MANAGEABLE DEBT BURDEN: Debt levels for the district are average with direct and overlapping debt equal to approximately 4% of actual market value. Annual debt service consumes a substantial portion of district revenues, although principal amortization is very rapid. .
CONCENTRATED TAX BASE: The district's tax base remains concentrated with the top 10 tax payers comprising over 28% of the area's taxable assessed valuation.
TIF DISTRICT PLEDGED REVENUE TO EXPIRE: A small tax increment district located within CAGID boundaries will expire at the end of fiscal 2013, leading to a decline in net pledged revenues available for debt service in fiscal 2014. This credit weakness is mitigated by the bonds' security of unlimited ad valorem property taxes.
PRIME SPECIAL DISTRICT LOCATION: The service area benefits from its location in downtown Boulder near the Pearl Street Mall and in close proximity to the University of Colorado main campus.
Boulder's CAGID was established in 1970 to provide parking services and related improvements to an approximately 30 square block area in downtown Boulder. CAGID manages and operates five parking garages, three permitted surface lots, and one metered parking lot. In addition, CAGID's area includes approximately 810 street metered parking spaces, revenues from which are collected by the city and annually appropriated to CAGID.
STABLE OPERATING REVENUES
CAGID's financial profile is sound with historically balanced budgets and solid unrestricted fund balances (assigned, unassigned, and committed per GASB 54). After experiencing a decline in operating revenue in 2009, CAGID's operating income has improved in each of the last three years due to higher parking rates and renewed demand for long- and short-term parking. The unrestricted fund balance at the end of fiscal 2011 was $2.5 million (audited), which is a solid 34% of total spending. CAGID expenditures remained elevated in 2011 and 2012 due to on-going capital improvements being made to the five garages with final completion for the projects expected in 2012.
Management planned a fiscal deficit and drawdown of unrestricted fund balance in 2012 as the final costs for the capital improvements are realized. Financial projections show a still adequate unappropriated fund balance of $1.95 million at the end of fiscal 2012, which would remain a solid 22% of budgeted spending. Fitch expects balanced financial performance to resume in fiscal 2013 with expenditures reverting to more baseline levels.
MANAGEABLE DEBT BURDEN
CAGID's debt profile and tax base reflect the district's limited geographical area. Debt ratios for the district are average with direct and overlapping debt at 4% of total market value, which totaled $833.4 million in 2012. Debt repayment is rapid with 100% repaid in 10 years, and a level annual debt service burden. Management stated that no additional debt issuance is planned and capital needs after 2012 will be met through annually budgeted funds.
CAGID has had sufficient revenues to pay debt service on all of its outstanding bonds for each of the last five years without the use the district's dedicated mill property tax levy for debt service. Coverage levels in fiscal 2011 for maximum annual debt service (MADS) were 2.1 times (x), and improved to 2.2x using projected 2012 revenues. The district will lose approximately 18% of its current annual revenues beginning in fiscal 2014 with the planned expiration of a small tax increment district located within CAGID boundaries. Using fiscal 2014 revenue projections, MADS coverage will drop to a thin 1.28x, however, this does not include the availability of the ultimate security of the district's unlimited ad valorem tax pledge.
Maintenance of strong reserves of at least 1.0x annual debt service is a key rating consideration, as this cushion would allow the district time to assess the property tax for debt service if the need should arise.
CONCENTRATED TAX BASE, ROBUST LOCAL ECONOMY
The area's tax base, which is comprised primarily of commercial property, has grown steadily since fiscal 2006 at a compound average rate of 7.9%. Assessed values contracted by 3% in 2011 (affecting collections in 2012) due to the delayed impact of recessionary pressures on district reassessed values. However, preliminary values for 2012 show a return to growth, and management does not expect any further declines at the next reassessment cycle in 2013. The tax base remains concentrated with the top 10 tax payers equaling approximately 28% of the area's total assessed valuation.
The service area benefits from its location in downtown Boulder, which includes significant commercial activity along with the popular Pearl Street Mall. Boulder's local economy softened during the national economic downturn but remains fundamentally sound. The city's unemployment is 6.3% as of July 2012, below state and national levels (8.3% and 8.6%, respectively). Socioeconomic indicators for the city and county point to wealth levels that are above state and national averages with respect to per capita income, although this is somewhat offset by Boulder's high individual poverty rate. Additionally, the presence of the University of Colorado's main campus in the downtown area attracts visitors to the area.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors, the Underwriter.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria