Fitch Ratings assigns an 'AA-' rating to Corpus Christi, Texas' (the city) $90 million general improvement bonds, series 2009. The bonds are scheduled to sell via negotiation the week of May 1, 2009. The bonds are secured by a property tax levy, limited to $2.50 per $100 taxable assessed valuation (TAV), on all taxable property within the city.
Fitch also affirms the city's existing debt ratings as follows:
--$152 million limited tax general obligation (GO) bonds at 'AA-';
--$90.4 million certificates of obligation (COs) at 'AA-';
--$18.5 million sales tax revenue bonds (baseball stadium project), series 2004, at 'AA-';
--$43.7 million sales tax revenue refunding and improvement bonds (arena project), series 2002, at 'A+'; and
--$38.9 million sales tax revenue bonds (seawall project), series 2001, at 'A+'.
The Rating Outlook for all bonds is Stable.
The 'AA-' rating reflects the city's growing economy and tax base, sound financial operations, moderate debt profile, and conservative stewardship. Benefiting from resurgent tax revenues, particularly sales taxes, general fund reserve levels have grown, while the property tax rate has been reduced. The city's sales tax receipts and taxable assessed valuation (TAV) continue to expand but at a more moderate pace after notable gains in the recent housing boom. Fitch notes this stability of sales tax revenues, even during the current recession, as a principal factor in the affirmation of city's sales tax revenue debt ratings. Non-tax revenue fluctuations may modestly narrow the city's financial reserves, based on conservative assumptions. Along with the expenditure containment measures and significant self-support for COs, these factors have allowed the city to manage its finances and capital plan prudently while maintaining a cushion beneath its voter-approved tax cap. Maintenance of adequate reserves is key to preserving credit quality.
With an estimated 2009 population nearing 300,000, Corpus Christi is the eighth largest city in Texas and the largest on the Gulf Coast. The diverse economic base consists primarily of petrochemicals, shipping, tourism, agriculture, and military. The Port of Corpus Christi ranks as the sixth largest in the nation based on tonnage and 44th in the world. Padre Island National Seashore, with approximately 70 miles of beach, and Mustang Island State Park are leading tourist attractions. The Corpus Christi Army Depot is the largest industrial employer in South Texas, and several U.S. Navy installations are located in the area. The Ingleside Naval Station, located across the bay, is scheduled for closure in 2010. At that time, property ownership will revert to the Port of Corpus Christi for redevelopment, which could, over time, offset the impact of losing the military presence. The unemployment rate of 5.6% for February 2009 remains favorable and slightly below the statewide average.
Audited fiscal 2008 results for the general fund recorded nearly balanced results. The fiscal 2008 ending unreserved fund balance totaled $27.6 million, or a strong 14.9% of spending, well in excess of the city's stated policy of 10%. Fiscal 2009 operations are being pressured by non-tax revenue declines, although sales tax receipts have been well above budget through March. However, the city is conservatively projecting modest declines for the remainder of the year. Coupled with planned pay-go capital outlays, building permit fee shortfalls, and delinquent industrial district payments, the city's cushion may decline by as much as $4.5 million, leaving still adequate reserves. The preliminary fiscal 2009 budget proposal includes balanced operations, level or modestly declining sales tax receipts, and no pay hikes for civilian personnel.
The current offering is the first installment of a $153 million authorization approved by voters in November 2008 which city officials do not anticipate will require a tax rate increase based on modest assumptions of tax base growth. Direct debt ratios are moderate, reflecting sizable self-support. Overall debt ratios climb to above-average levels, primarily due to area school districts and the local community college. Payout is slightly above average with 57% principal retirement in 10 years.
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Contacts:
Fitch Ratings, Austin
Jose Acosta, +1-512-215-3726
Gabriela
Quiroga, +1-512-215-3731
Cindy Stoller, +1-212-908-0526
(Media
Relations, New York)
cindy.stoller@fitchratings.com