Fitch Ratings assigns an 'A' rating to the following Sand Creek Metropolitan District, Colorado (the district) general obligation limited tax (GOLT) bonds:
--$16.375 million GOLT refunding bonds, series 2010A
--$11.895 million GOLT refunding bonds, series 2010B.
The series 2010 bonds are expected to sell via negotiation in the middle of September.
In addition, Fitch upgrades the following rating:
--Approximately $65.6 million in outstanding GOLT bonds to 'A' from 'A-'.
The Rating Outlook is revised to Stable from Positive.
RATING RATIONALE:
--The upgrade reflects the district's continued development, solid tax base growth, and market absorption as evidenced by low vacancy rates and enabled by its favorable location along a major transportation corridor near the Denver International Airport and competitive tax rates.
--A promising pipeline of new development should maintain solid assessed value growth, although tax base concentration will continue to characterize the district.
--The district has healthy financial operations evidenced by solid general fund balance reserve levels.
--The debt profile of the district is mixed, characterized by high debt levels and slow principal amortization, balanced against limited future debt needs.
KEY RATING DRIVERS:
--The district's continued development, which is advantaged by its strategic location, is important to maintaining the current rating.
--The district's limited future capital needs mitigates some credit concern of the high debt burden over time.
SECURITY:
The bonds are payable from the district's property tax levy, limited to 42.5 mills, and from specific ownership taxes.
CREDIT SUMMARY:
Sand Creek Metropolitan District benefits from a favorable location for growth, along I-70 near Denver International Airport in the City of Aurora and the City and County of Denver. The district has experienced strong commercial and industrial development in recent years with tax base gains averaging 10.3% annually since fiscal 2006. However, the tax base remains concentrated, with the top 10 taxpayers comprising 33% of the district's taxable assessed valuation (TAV).
The district is in an advanced stage in its development and has minimal capital needs. The district's low tax rate and high reserve levels provide it with ample financial flexibility going forward. Also, as the tax base strengthens, the district becomes decreasingly reliant on reimbursements from cost sharing agreements. The district is nearly 60% developed and the retail and industrial vacancy rates, currently 1% and 6% respectively, are low relative to the surrounding areas. Fitch will monitor the progress and completion of several promising new developments in the district's pipeline both planned and under construction.
Proceeds of this issuance will be used to refund the district's series 2000 and 2007 bonds, generating net present value savings of approximately $1.4 million. The district's direct debt levels continue to be high relative to other tax-supported issuers, but within range for these types of entities. Direct debt equals 10.4% of market value. Overall debt levels are higher 14.7% of market value. Amortization is below average with 28.4% of debt retired in 10 years. Future capital needs are minimal and no additional debt is planned.
Sand Creek Metro District is a limited purpose government encompassing 1,253 acres in the northeast Denver metropolitan area, approximately 12 miles east of downtown Denver and 10 miles southwest of Denver International Airport (DIA). The district provides financing for the construction and installation of streets, drainage structures, street safety controls, parks, water and sewer improvements and other infrastructure systems needed to encourage and support the existing and future development.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in the report 'Tax-Supported Rating Criteria', this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc., and IHS Global Insight.
Related Research:
'Tax-Supported Rating Criteria', dated Aug. 16, 2010
'U.S. Local Government Tax-Supported Rating Criteria', dated Dec. 21, 2009.
For information on Build America Bonds, visit 'www.fitchratings.com/BABs'.
Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=492470
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