Fitch Rates Three Rivers Park District, MN ULTGOs 'AAA'; Outlook Stable

NEW YORK--()--Fitch Ratings has assigned an 'AAA' rating to the following Three Rivers Park District, Minnesota (the district) general obligation (GO) bonds:

--$7.945 million GO bonds, series 2015B;

--$705,000 GO capital equipment notes, series 2015C.

The bonds will finance the acquisition and betterment of park properties and facilities and the acquisition of capital equipment. The bonds are expected to sell via competitive sale on Nov. 19.

In addition, Fitch affirms the following ratings at 'AAA':

--$63 million outstanding GO bonds.

The Rating Outlook is Stable.

SECURITY

The bonds are paid by a pledge of the district's full faith and credit and unlimited ad valorem taxing power.

KEY RATING DRIVERS

STRONG ECONOMIC BASE: The local economy is deep and diverse, anchored by the Twin Cities metropolitan region. Hennepin County benefits from above average wealth, employment and education levels compared to national norms.

SOLID FINANCIAL OPERATIONS: Financial operations are structurally balanced. Reserve levels are substantial and allow management the flexibility to respond to fiscal challenges.

LIMITED PURPOSE DISTRICT: The low risk profile is also supported by the limited nature of district operations with inherent spending flexibility mitigating revenue raising limitations.

MANAGEABLE DEBT PROFILE: Overall debt levels are moderate, both on a per capita basis and when measured against the substantial tax base. Other long-term liabilities are easily managed.

RATING SENSITIVITIES

SHIFT IN FUNDAMENTALS: The 'AAA' rating is sensitive to changes in the district's very strong underlying credit fundamentals, including its conservative financial management and solid socio-economic profile.

CREDIT PROFILE

Three Rivers Park District includes parks in Hennepin County outside the city of Minneapolis, Scott County, and four adjacent counties; however, the district's taxing borders encompass only Hennepin County excluding the city of Minneapolis. The district's recreational resources encompass 27,000 acres and recorded over 10.4 million visits in 2014, a 4% increase over 2013 and more than double the number of visits in 2005.

STRONG ECONOMIC BASE

The district serves an affluent community that benefits from a deep and diverse regional economy anchored by the Twin Cities. Both the financial services and durable goods manufacturing sectors account for a greater percentage of total employment than the national average. The August 2015 county unemployment rate of 3.4% was well below the national average of 5.2%. Wealth indicators are above average with county per capita income levels at 121% of the state level.

AMPLE RESERVES AUGMENT FINANCIAL FLEXIBILITY

The district's limited scope of service responsibilities, maintenance of strong financial reserves, and a stable, property tax-based revenue structure, provide a very low overall risk profile. Financial operations are structurally balanced with recurring revenues matching or exceeding recurring expenditures. The district is required to budget for 98% of property tax collections, although actual receipts usually come in above that, and personnel costs are actively managed.

Financial margins are substantial with unreserved or unrestricted general fund balances exceeding 40% of spending for at least the past seven years; 2014 ended with a $736,000 surplus yielding a general fund unrestricted balance of $17.7 million or a healthy 51% of spending.

Management expects to finish 2015 with a surplus, though slightly smaller than in 2014. The district is shifting to fund operations more through user fees than taxes, and user fee revenue in 2015 is currently trending ahead of budget. The district is subject to a tax cap, which limits its levy capacity for operations; the debt service levy is unlimited. In recent years, the capacity was somewhat narrow, but with 8% growth in market value in the most recent year, the additional levy capacity grew to almost $4 million or almost 11% of spending. Anticipated growth in assessed values should generate growth in levy capacity in the near future. Management anticipates a small increase in the levy for 2016. The district plans to spend down a moderate portion of its fund balance on capital projects in the next few years, with reserve levels remaining at solid levels.

MANAGEABLE LONG-TERM OBLIGATIONS

Total debt levels including overlapping borrowing are a moderate $3,943 per capita and 3.3% of taxable market value. Future borrowing plans are manageable, particularly given the very rapid amortization rate of 82% in 10 years.

Long-term liabilities related to employee benefits are modest. Most employees are in state-sponsored pension plans, and the district annually funds its full required contribution. Falling funding levels of the statewide plans have triggered an increase in the contribution rate, which should be easily absorbed by the district. OPEB benefits are mainly limited to an implied rate subsidy for retiree health care. Carrying costs for pension, other post-employment benefits (OPEB) and debt service were a moderate 21% of 2014 governmental fund spending.

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

Fitch recently published an exposure draft of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated Sept. 10, 2015). The draft includes a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to fewer than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published by Jan. 20, 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. Fitch anticipates the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date.

In addition to the sources of information identified in the applicable criteria specified below, this action was informed by information from CreditScope, IHS Global Insight, and Zillow Group.

Applicable Criteria

Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869942

Tax-Supported Rating Criteria (pub. 14 Aug 2012)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria (pub. 14 Aug 2012)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=993920

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=993920

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Eric Friedman
Director
+1-212-908-9181
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Shannon McCue
Director
+1-212-908-0593
or
Committee Chairperson
Laura Porter
Managing Director
+1-212-908-0575
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Eric Friedman
Director
+1-212-908-9181
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Shannon McCue
Director
+1-212-908-0593
or
Committee Chairperson
Laura Porter
Managing Director
+1-212-908-0575
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com