NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the 'AAA' rating for the following Bloomington, MN (the city) bonds:
--$64 million general obligation (GO) bonds.
The Rating Outlook is Stable.
The bonds are unlimited tax general obligations of the city for which the city pledges its full faith and credit and power to levy direct general ad valorem taxes.
KEY RATING DRIVERS
FINANCIAL STABILITY: The city benefits from strong financial practices reflected by its sophisticated, proactive financial planning, above-average reserves, and consistent financial operations.
THRIVING MALL ANCHORS ECONOMY: The local economy, anchored by the large and healthy Mall of America (MOA), is prosperous with below average unemployment levels and high wealth levels.
MODERATE DEBT LEVELS: Debt levels are affordable and future capital needs are manageable.
The rating is sensitive to shifts in fundamental credit characteristics including the city's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.
Bloomington is located in Hennepin County (GO bonds rated 'AAA', Stable Outlook by Fitch), approximately 11 miles from Minneapolis, and is home to the MOA, the largest shopping center and entertainment complex in the United States.
DIVERSIFIED ECONOMY WITH STRONG SOCIOECONOMIC FUNDAMENTALS
Bloomington had a 2012 population of 86,033 residents. In addition to participating in the expansive Minneapolis metropolitan economy, the city's own economic base is broad and includes a mix of industry, including large technology, healthcare, and manufacturing concerns. Unemployment for July 2013 was 4.9%, below the state average of 5.1% and well below the nation's of 7.7%. Wealth indicators and taxable market values per capita are well above average, though the overall tax base has contracted some in recent years. The city expects growth in residential values to restore positive assessed value trends.
The mall makes up over 10% of the city's total assessed value. The city continues to experience growth centered around the mall, with a new high-end hotel that recently opened and other substantial expansion projects complementing MOA's continued robust occupancy and sales performance. The city does not receive sales tax revenue from MOA, but the mall is the largest employer in the city, supplying approximately 13,000 jobs. The city is also home to more hotel rooms than Minneapolis and St. Paul combined.
CONSISTENTLY STRONG FINANCIAL PERFORMANCE
The combination of historically strong economic indicators and manageable budgetary increases has contributed to a strong financial position. The city posted a $686,000 general fund surplus (1.2% of expenditures) for 2012. The city's unrestricted general fund balance was a substantial $20 million, representing 34.5% of expenditures and transfers out. City officials project another slightly smaller operating surplus for 2013, primarily through cost-savings measures and diligent budget monitoring.
Property taxes accounted for almost two-thirds of general fund operating support in 2012. The city passed a 4.95% increase in the property tax levy for 2013, and has a smaller 3.22% increase planned for 2014 after several years of decreases. A lodging tax, permit fees and an admission tax are other key revenue sources for the city. Overall, the measured pace of budgetary expansion combined with the discretionary nature of significant portions of the budget and maintenance of ample reserves provides the city with considerable financial flexibility.
MANAGEABLE DEBT LEVELS AND CARRYING COSTS
Low debt ratios are a product of high internal funding for capital projects. Overall debt levels are 1.5% of market value or $1,754 on a per capita basis. Payout is well above average with approximately 88% of debt retired within 10 years. Additional debt plans are moderate, including a financing for new projects planned before the end of 2013.
The city participates in two state pension plans for all employees except volunteer firefighters, for whom the city has a single-employer plan. The city makes all statutorily required payments to the state plans, which are approximately 66% and 71% funded using Fitch's 7% return assumption. Fitch believes the city has sufficient financial flexibility to manage increased payments that could be required to improve the plans' currently somewhat weak funding levels. The city's fire plan is currently 111% funded assuming a 7% return, with additional funds set aside for future contributions. The city provides only an implicit subsidy for other post-employment benefits for retirees.
Additional information is available at 'www.fitchratings.com'.
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, Zillow.com, National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 14, 2012;
--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 14, 2012.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria