Fitch Ratings assigns an 'AAA' rating to Three Rivers Park District, Minnesota's (the district) $4,410,000 general obligation (GO) bonds, series 2009B and $685,000 GO capital equipment notes, series 2009C. The bonds will sell competitively on Sept. 10, 2009. The bonds and notes are GOs of the district secured by its full faith and credit pledge and power to levy direct unlimited general ad valorem taxes on property within its jurisdiction. Bond proceeds will fund various park improvements and the notes will finance the acquisition of capital equipment. At this time, Fitch also affirms the 'AAA' rating on the district's approximately $79.5 million of outstanding GO debt. The Rating Outlook is Stable.
The 'AAA' rating reflects the district's strong fiscal stewardship, consistently solid financial performance, modest direct debt profile, and rapid amortization. While the Minneapolis metropolitan economy is broad, the area has experienced employment contraction and increased foreclosures associated with the ongoing recession. Tax base declines anticipated for fiscal 2010 and 2011 are creating some budgetary pressures, given the district's reliance on property taxes for operating support. However, officials have indicated that expenditure control measures and revenue enhancements will result in a balanced budget. The district's demonstrated budgetary discipline coupled with the maintenance of sizable reserves contributes to overall financial flexibility, and Fitch expects the district will remain financially sound.
Three Rivers Park District, the only park district in the state with taxing authority, serves the suburban area of Hennepin County (excluding the City of Minneapolis), portions of Scott County through an annual operating agreement, and a number of selected park facilities in five adjacent counties. Enhancements to marketing efforts have helped the district continue to realize steady growth in utilization. In 2008 the district received nearly 6.8 million visitors, and annual visitor growth has averaged nearly 8% since 1999. The district's focus on preservation of the natural environment and maintenance of existing park land limits capital requirements and provides considerable discretion in outlays. In addition, the district enjoys broad public support from a relatively wealthy and modestly growing residential population base.
The district's limited scope of service responsibilities and maintenance of strong reserve levels reduces operating risks. The general fund produced surpluses in each of the past six years (after transfers) due to strong tax base growth, tax levy increases, as well as firm fiscal controls. The unreserved general fund balances grew to over 50% of spending, or $15.2 million in 2008 (fiscal year-end December 31), compared to about 47% or $12.6 million in 2007. For the close of fiscal 2009, officials project a modest general fund operating surplus.
The district does face some budgetary challenges for fiscal 2010 and 2011. Property taxes represent over 80% of general fund revenues and a 3.8% decline in taxable values is expected for fiscal 2010, with a similarly sized decrease projected for fiscal 2011. Officials report that the district will likely limit the increase in property taxes to only 2% for fiscal 2010, the lowest rate of growth in many years. However, with this modest increase, the district will maintain some levy margin, providing additional budgetary flexibility for fiscal 2011. Budget balance for fiscal 2010 will require the implementation of various spending control measures, including no cost of living adjustments and scaled-back merit increases, as well as fee increases. No layoffs are anticipated and neither is the use of available reserves to balance the budget.
The metropolitan Minneapolis economy has not been immune to the effects of the ongoing recession. Growth in the district's taxable values averaged nearly 11% annually from 2000 to 2007, but increased only modestly in 2008. In addition, area unemployment rates, which historically have been relatively low, have climbed considerably, with the June 2009 county unemployment rate at 8.3%, up from 5.1% a year ago. Also, housing information indicates a sizable increase in area foreclosure rates and mortgage delinquencies. However, according to certain independent economic forecasts, Minneapolis, unlike many other metropolitan areas, is expected to rebound in 2010, with a 0.5% increase in job growth projected. Per capital income levels for the county remain well above state and national averages.
The district's very low direct debt level represents 0.07% of indicated market value and just $110 per capita, reflecting limited capital and maintenance requirements as well as the breadth of the population and tax base. The district externally finances most of its capital needs, with annual debt issues totaling approximately $15 million anticipated over the next several years. Additionally, principal repayment is rapid with over 80% repaid in 10 years. Including the debt of overlapping entities, the debt ratios rise to more moderate levels.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
Contacts:
Fitch Ratings
Mark Campa, 512-215-3727 (Austin)
Melanie A.J.
Shaker, 312-368-3143 (Chicago)
or
Kevin Duignan, 212-908-0630
(Media
Relations, New York)
kevin.duignan@fitchratings.com
Sandro
Scenga, 212-908-0278
(Media Relations, New York)
sandro.scenga@fitchratings.com
