Fitch has assigned an 'A+' rating to the Avondale,
Arizona Municipal Development Corporation (the corporation)
$12,040,000 excise tax revenue refunding bonds, series 2005 (the
bonds). Additionally, the 'A+' rating is affirmed for the
corporation's $40.1 million excise tax revenue bonds outstanding (post
refunding). The bonds are scheduled to be sold via negotiation on or
about Aug. 30 through Stone & Youngberg LLC. The Rating Outlook is
Stable.
The bonds are special obligations of the corporation payable from payments made by the city. These payments will be provided and secured by a pledge of and first lien on the city's excise taxes. Proceeds of the bonds will be used to refund a portion of the corporation's outstanding excise tax revenue debt for annual interest savings and pay issuance costs.
Avondale's (the city) favorable financial position, sound management practices, and continued growth potential are primary factors in the 'A+' rating. Also reflected in the rating are the city's heavy reliance on excise tax revenues to fund operations and the vulnerability of this revenue stream to changing economic conditions. Housing starts surged in 2004 following a modest slowdown, and projections for the current year suggest continued strength. The city's recent shift in development emphasis to retail and commercial businesses is lessening the reliance on construction activity for sales tax revenues and spurring significant increases in total receipts.
The city's financial profile is sound. Operating results in fiscal 2004 were positive due in large part to a surge in sales tax revenues and slower growth in expenditures. At the end of fiscal 2004, the unreserved, undesignated general fund balance was nearly $13 million, roughly 40% of expenditures and transfers out. This total was up sharply from the $9.6 million (25%) reported in fiscal 2003, when the city recorded a planned $4.3 million drawdown in reserves. Liquidity also rebounded in fiscal 2004; cash and investments at year-end equaled roughly $14 million, up from $10 million in the prior year. Debt ratios, while above average, have declined recently as both population and valuation levels have increased at a brisk pace.
The excise taxes pledged to pay debt service on the bonds include transaction privilege (sales) taxes, state-shared revenues (consisting of state-shared sales taxes and state revenue sharing), franchise taxes, permits and fees, and fines and forfeitures. The city sales tax is the largest excise tax component, comprising more than 65% of total excise tax revenues in fiscal 2004. Growth in sales tax revenues has been aided by the addition of two separate 0.5% taxes for water, wastewater, and streets (fiscal 2002) and public safety (fiscal 2004). The total local sales tax rate is 2.5%.
Both sales tax and overall excise tax revenue resumed a rapid growth rate in fiscal 2004 following a modest deceleration in fiscal 2003; the slowdown was due to the recession and a decline in local construction activity. Excluding the new sales tax components, sales taxes in fiscal 2004 increased more than 30% from the prior year's, and total excise tax revenues increased nearly 20%. Revenues had increased less than 10% in fiscal 2003, following healthy double-digit percentage gains in the three preceding fiscal years. Projected fiscal 2005 totals suggest nearly identical results, with sales taxes (excluding new components) gaining more than 30% and total excise tax revenues increasing 20%.
Avondale is located 15 miles west of Phoenix in Maricopa County. The current estimate of 60,255 residents represents a remarkable 65% gain over the 2000 census total and is nearly quadruple the 1990 census total of 16,169. Fitch believes that the city's advantageous location in a high-growth corridor of the Phoenix metropolitan area, ample undeveloped land, and expanding commercial sector all contribute to favorable growth prospects.
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.
The bonds are special obligations of the corporation payable from payments made by the city. These payments will be provided and secured by a pledge of and first lien on the city's excise taxes. Proceeds of the bonds will be used to refund a portion of the corporation's outstanding excise tax revenue debt for annual interest savings and pay issuance costs.
Avondale's (the city) favorable financial position, sound management practices, and continued growth potential are primary factors in the 'A+' rating. Also reflected in the rating are the city's heavy reliance on excise tax revenues to fund operations and the vulnerability of this revenue stream to changing economic conditions. Housing starts surged in 2004 following a modest slowdown, and projections for the current year suggest continued strength. The city's recent shift in development emphasis to retail and commercial businesses is lessening the reliance on construction activity for sales tax revenues and spurring significant increases in total receipts.
The city's financial profile is sound. Operating results in fiscal 2004 were positive due in large part to a surge in sales tax revenues and slower growth in expenditures. At the end of fiscal 2004, the unreserved, undesignated general fund balance was nearly $13 million, roughly 40% of expenditures and transfers out. This total was up sharply from the $9.6 million (25%) reported in fiscal 2003, when the city recorded a planned $4.3 million drawdown in reserves. Liquidity also rebounded in fiscal 2004; cash and investments at year-end equaled roughly $14 million, up from $10 million in the prior year. Debt ratios, while above average, have declined recently as both population and valuation levels have increased at a brisk pace.
The excise taxes pledged to pay debt service on the bonds include transaction privilege (sales) taxes, state-shared revenues (consisting of state-shared sales taxes and state revenue sharing), franchise taxes, permits and fees, and fines and forfeitures. The city sales tax is the largest excise tax component, comprising more than 65% of total excise tax revenues in fiscal 2004. Growth in sales tax revenues has been aided by the addition of two separate 0.5% taxes for water, wastewater, and streets (fiscal 2002) and public safety (fiscal 2004). The total local sales tax rate is 2.5%.
Both sales tax and overall excise tax revenue resumed a rapid growth rate in fiscal 2004 following a modest deceleration in fiscal 2003; the slowdown was due to the recession and a decline in local construction activity. Excluding the new sales tax components, sales taxes in fiscal 2004 increased more than 30% from the prior year's, and total excise tax revenues increased nearly 20%. Revenues had increased less than 10% in fiscal 2003, following healthy double-digit percentage gains in the three preceding fiscal years. Projected fiscal 2005 totals suggest nearly identical results, with sales taxes (excluding new components) gaining more than 30% and total excise tax revenues increasing 20%.
Avondale is located 15 miles west of Phoenix in Maricopa County. The current estimate of 60,255 residents represents a remarkable 65% gain over the 2000 census total and is nearly quadruple the 1990 census total of 16,169. Fitch believes that the city's advantageous location in a high-growth corridor of the Phoenix metropolitan area, ample undeveloped land, and expanding commercial sector all contribute to favorable growth prospects.
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.
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