Fitch Ratings assigns an 'A+' rating to Boerne, Texas' (the city) $10,000,000 general obligation (GO) bonds, series 2009. Fitch also affirms the 'A+' rating on the city's outstanding tax-supported debt, consisting of $14.1 million in GO bonds and $5.1 million in tax notes. The series 2009 bonds are scheduled to price the week of Sept. 14, 2009 via negotiation. The Rating Outlook is revised to Positive from Stable.
The 2009 bonds are direct obligations of the city, payable from the levy and collection of ad valorem taxes, limited to $2.50 per $100 assessed valuation on all taxable property within the city. Bond proceeds will be used to finance a new public library, a fire station expansion, trail projects, a new police headquarters, and sidewalk projects.
The 'A+' rating reflects the city's strong financial performance aided by conservative and tenured management, solid gains in sales tax revenue and taxable property values, and a low property tax rate. The Outlook revision is due to the city's strong prospects for future development, the increasing general fund balance levels, and the ability of the city to continue to prosper even under the current economic environment. The rating also reflects the city's moderately high overall debt ratios with below-average amortization and dependence on economically-sensitive sales tax revenues for general fund operations. Despite the current economic slow-down, the city is expected to be able to maintain a balanced financial profile.
Boerne, with an estimated 2009 population of roughly 11,145, is located in central Texas, approximately 30 miles west of San Antonio on Interstate Highway 10. The city is the county seat of the predominately rural Kendall County and its principal commercial center. Boerne is experiencing population and economic growth due to its desirable location and proximity to San Antonio. The city's population has increased 80% since the 2000 census. With an economy historically based on tourism, agribusiness, and manufacturing, recent development has included additional retail, commercial, and residential construction. This development trend is expected to continue given ongoing and planned projects. Taxable assessed valuations (TAV) has demonstrated steady, stable growth at double-digit levels since fiscal 2000 and has increased on average almost 18% annually.
The city has maintained a strong financial profile with general fund unreserved balances of no less than 40% of spending since fiscal 2002. For fiscal 2008, the city reported net income of $572,000, and an unreserved fund balance of $5.5 million, or 70% of spending and transfers out. In the first quarter of 2009, city revenues began to be impacted by the national economic slow-down, with sales taxes, ad valorem, hotel/motel taxes, franchise fees, and permits fees 6.1% below budget. The city reacted by reducing expenditures and capital projects in all departments, without reducing service levels. Due to these adjustments, the city expects to add $250,000 to the fiscal 2009 general fund balance.
Sales tax revenues account for the largest source of income in the general fund, and are down 1.6% through June 2009, compared to the same period last year. The fiscal 2010 budget is balanced, with additional expenditure reductions, and a modest decline in sales tax revenues anticipated. Concerns about economically-sensitive sales tax revenue is somewhat mitigated by the city's policy of keeping higher general fund balance levels than the minimally required equivalent of three months of expenditures in reserve.
This issuance is the final installment of a $21.5 million GO bond authorization. Potential future capital needs include a new city hall and civic center, but no plans have been made to secure additional voter authorization. The city's direct debt burden is above average at $2,620 per capita, and 2.87% of TAV, while the overall debt burden is high at $5,174 per capita, or 5.7% of TAV, primarily due to the local school district debt levels
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Fitch Ratings, Austin
Andy Kaaz, 512-215-3730
Steve Murray,
512-215-3729
or
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212-908-0526, New York
Email: cindy.stoller@fitchratings.com
