Fitch Affirms Palm Beach Gardens, FL's ULTGO at 'AA+', Public Improvement ... - MarketWatch (press release)
NEW YORK, Sep 12, 2011 (BUSINESS WIRE) -- In the course of routine surveillance, Fitch Ratings has affirmed the following ratings for Palm Beach Gardens, Florida (the city):
--$9.6 million in outstanding unlimited tax general obligation (ULTGO) bonds at 'AA+';
--$19.1 million in public improvement and refunding bonds, series 2003 at 'AA'.
The Rating Outlook is Stable.
SECURITY
The ULTGO bonds are general obligations of the city and are secured by the city's full faith, credit and unlimited taxing power. The non-ad valorem revenue bonds are payable from and secured by non-ad valorem revenues budgeted and appropriated by the county on an annual basis.
KEY RATING DRIVERS
Strong Financial Management: Reserve levels consistently above prudent policy levels and controlled expenditure growth point to strong fiscal discipline. The ability to implement additional reductions, if required, augments the city's financial flexibility.
Auspicious Economic Prospects: A diversifying economy, desirable quality of life, above-average wealth levels, and strong population growth projections underpin the city's favorable prospects for continued economic vibrancy.
Low Debt Burden: Debt levels should remain low due to limited capital needs. The favorable debt profile is enhanced by rapid amortization of outstanding principal.
Covenant to Budget and Appropriate: The revenue bond rating is notched off the city's ULTGO rating and reflects the overall creditworthiness of the city and its covenant to budget and appropriate legally available non-ad valorem revenues to pay debt service. Strong debt service coverage provided by the city's non-ad valorem revenues should continue as excess revenues fund essential government operations.
CREDIT PROFILE
The city is located in southeast Florida in Palm Beach County (GO rated 'AAA', Outlook Stable by Fitch) approximately 10 miles north of West Palm Beach and 70 miles north of Miami. The city currently has a land area of 56 square miles, making it one of the largest cities in Palm Beach County. Palm Beach Gardens is a relatively upscale residential community with a large retiree presence.
Financial operations are consistently strong, underpinned by positive operating margins and ample reserves. The city closed fiscal 2010 with an unreserved fund balance equal to $24.3 million or 36% of total spending, up from $17.7 million or 28% of total spending in fiscal 2006. Unaudited fiscal 2011 results project a slight decrease in unreserved fund balance equal to $22 million or 32% of total spending. The net change in fiscal 2011 fund balance is due to a slight weakening in ad valorem revenues.
The city is heavily dependent on ad valorem taxes to fund operations and, as such, has faced pressure from property tax reform measures and tax base declines due to the downturn in the housing market. Management has responded by eliminating positions, freezing wages, increasing employee contributions for health coverage, and scaling back capital spending, travel, and training. The fiscal 2012 budget also appropriates approximately $2 million of fund balance, but reserves would remain at or close to 30% of spending. The city maintains a healthy degree of revenue-raising flexibility via utility taxes, communication service taxes, and fees for solid waste and storm water. Combined, the city estimates it could raise up to $8.6 million from these sources. For fiscal 2012 the city council approved an ordinance raising the communication service taxes to 3.5%, leaving room for further revenue raising capacity below the 5.22% maximum.
The city has consistently produced a very low level of unemployment. Real estate and construction thrived during the city's recent population boom, but job losses continue to mount within these sectors due to the decline in the housing market and recession. The city's employment base has slightly increased by 0.7% over the past 12 months and unemployment remains comparatively low at 6.9% as of May 2011. The regional economy has also benefited from the established presence of The Scripps Research Institute and Max Planck Society, which have attracted high-quality jobs and younger professionals to the region.
Fitch expects debt ratios will remain low given the city's limited debt plans. Currently, overall debt levels are $1,838 per capita or 0.8% of taxable assessed value. The city's future capital needs are manageable and its fiscal 2012-2015 capital improvement plan (CIP) totals $19.5 million which is significantly smaller than previous CIPs due to the city paring capital spending to avoid an escalation in its fixed costs. Amortization is extremely rapid with 97% of outstanding principal repaid in 10 years. The city's pension contribution is a mild cost pressure, totaling $1.2 million or 1.8% of total spending for fiscal year 2010. The city does not explicitly subsidize post employment healthcare, but recognizes an unfunded actuarial accrued liability of $7 million, equal to 0.1% of market value in fiscal 2010. The city funds this liability on a pay-as-you-go basis, which was $141,000 or 0.2% of total spending in fiscal 2010.
Available fiscal 2011 non-ad valorem revenues are estimated at $24 million or 10.6 times (x) maximum annual debt service (MADS) on the public improvement revenue bonds. The strong debt service coverage reflects the substantial role that non-ad valorem revenue serves in funding city services. The city has no outstanding debt issues secured by specific sources of available revenue which would be senior to the city's public improvement revenue bonds. In addition, the city has covenanted that it will not issue additional debt secured by non-ad valorem revenues unless the non-ad valorem revenues for the previous fiscal year are greater than 2.0x MADS.
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, and National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 15, 2011;
--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 15, 2011.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS . IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE ' WWW.FITCHRATINGS.COM '. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
SOURCE: Fitch Ratings
Fitch Ratings Primary Analyst Leora Lipton, +1-212-908-0507 Analyst Fitch, Inc. One State Street Plaza New York, NY 10004 or Secondary Analyst Barbara Rosenberg, +1-212-908-0731 Director or Committee Chairperson Douglas Scott, +1-512-215-3725 Managing Director or Media Relations: Cindy Stoller, +1-212-908-0526 (New York) cindy.stoller@fitchratings.com
Copyright Business Wire 2011
12 Sep, 2011--
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