In the course of routine surveillance, Fitch Ratings has taken the following actions on St. Charles Parish Law Enforcement District, Louisiana's general obligation limited tax bonds:
--$14.7 million general obligation limited tax (GOLT) bonds outstanding affirmed at 'AA'.
The Rating Outlook is Stable.
RATING RATIONALE:
-- Consistently strong financial operations are characterized by healthy reserves and ample liquidity.
-- The extensive, although concentrated, tax base has increased substantially over the past five years.
-- Debt levels are low relative to the district's tax base.
-- Favorable economic environment is centered on energy, oil refining and chemical production.
-- Coverage by pledged property tax revenue of maximum annual debt service (MADS) is wide at over 14 times (x).
-- Reliance upon the net proceeds of the pledged tax levy to fund operations reduces the possibility of coverage dilution through additional bond issuance.
KEY RATING DRIVERS:
-- Maintenance of large reserve balances given the district's limited ability to raise additional revenues and susceptibility to hurricane risk;
-- Continued stability of the district's tax base.
SECURITY:
The bonds are secured by a pledge of revenues derived from the levy of a special tax up to 17.5 mills on all taxable property within the district.
CREDIT SUMMARY:
The district, which is co-terminus with St. Charles Parish, is the financing entity for the parish sheriff's office. The sheriff's office provides law enforcement and corrections services within the parish and also serves as the parish property tax collector.
Sheriff's office finances are well-managed with consistent general fund operating surpluses. Net pledged property tax proceeds provided over 50% of operating revenues in fiscal 2010. Other important revenues include a 3.7 mill levy for employee salaries and benefits and payments from federal, state and local governments to house their prisoners in the district's correctional facility.
Property tax collections have benefited from the rapid expansion of district taxable assessed values (TAV), enabling the sheriff's office to expand activities while maintaining substantial reserves. In fiscal 2010, the unreserved general fund balance totaled $14.7 million or 43% of general fund expenditures. Targeted general fund balance of 32% of expenditures is sized to avoid cash flow borrowing due to the timing of property tax receipts. Liquidity is ample relative to current obligations. Preservation of robust financial reserves is a positive credit feature given that the district is taxing at the maximum rate and has limited ability to raise additional revenues.
District debt consists of the series 2009 bonds, a portion of which were used to fund a new centralized administrative facility for the department. Overall debt levels are low with direct and overlapping debt at 1.3% of full value and $2,118 on a per capita basis. Amortization is slightly below average as 46% of principal is retired within ten years. Most capital needs are funded on a pay as you go basis and officials have no plans to issue additional bonds.
The tax base is extensive and highly concentrated. The top nine taxpayers constitute about 63% of TAV and consist of electric generating, oil refining and chemical manufacturing facilities, all of which represent significant assets to the regional and national economy. The top taxpayer is Entergy Louisiana, which owns the Waterford 3 nuclear plant and accounts for almost 18% of assessments. Entergy is investing $500 million to replace two steam generators at the nuclear facility.
Taxable values dropped by 3.2% in fiscal 2011 after expanding by 35% during the prior four years. The decline was mostly attributable to the lower price of oil inventories at refineries within the district. Preliminary reports show TAV growing by 9% in fiscal 2012. Future tax base growth is anticipated as a number of large industrial exemptions are scheduled to expire over the next eight or nine years.
The area economy relies heavily upon its industrial base which provides a significant portion of parish employment. The parish has experienced a decrease in jobs over the past two years due to the recession although unemployment rates remain well below the national averages. Wealth indices are generally above the state average. Large construction projects at a number of industrial facilities both within and adjacent to the district are expected to provide a boost to local economic activity.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, IHS Global Insight.
Applicable Criteria and Related Research:
'Tax-Supported Rating Criteria', dated Aug. 16, 2010.
'U.S. Local Government Tax-Supported Rating Criteria', dated Oct. 8, 2010.
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and 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=564566
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