AUSTIN, Texas, Nov 04, 2011 (BUSINESS WIRE) –
As part of ongoing surveillance, Fitch Ratings takes the following
rating action on Commerce City, CO:
–$30.9 million outstanding certificates of participation (COPs or
certificates), series 2006 affirmed at ‘A+’.
In addition, Fitch assigns an implied unlimited tax general obligation
rating of ‘AA-’
The Rating Outlook is Stable.
KEY RATING DRIVERS
Essentiality of Leased Assets: The leased assets are essential to the
operations of the city.
Sound Financial Management: Prudent financial management has typically
maintained solid reserves despite budgetary pressures stemming from
economic uncertainty.
High Debt Burden: Overall debt ratios are very high and direct debt is
amortized very slowly. Credit concerns regarding the high debt burden
are moderated somewhat by the city’s lack of additional borrowing needs.
Sales Tax Dependence: The city relies heavily on sales tax revenue which
is vulnerable to declines in consumer consumption and general economic
conditions.
Tax Base Concentration: The city’s top 10 taxpayers comprise a high 28%
of the total tax base. The single largest taxpayer, Suncor Energy,
accounts for 17.5% of the tax base.
Broad Economy: Although the local unemployment levels are very high, the
city is favorably located within the Denver metropolitan area, offering
broader employment and recreational opportunities and prospects for
long-term growth.
SECURITY
The certificates are secured by lease rental payments made by the city
to the Commerce City Finance Authority for use and occupancy of a civic
center, which includes city hall and city offices, as well as the police
department, municipal court, and city council chambers. Lease rental
payments are payable from any legally available funds of the city
appropriated by city council for such purpose.
CREDIT PROFILE
The city is heavily dependent on volatile sales tax revenues, which
typically comprise a little over 70% of the general fund revenue.
However, the city has typically maintained solid reserve levels which
offset to a degree credit concerns regarding this revenue concentration.
After an operating surplus in 2009, 2010 results were bolstered by one
time sales tax settlement collections totaling about $20 million from
three distinct taxpayers. The ending unreserved general fund balance
grew to 77% of spending from 33% in 2009. The 2011 operating budget is
balanced. The city plans to reduce reserves through 2012 for one time
capital projects ($9.3 million) and to make a loan to the Urban Renewal
Authority ($4 million). Assuming balanced operations during those two
years, the city’s fund balance at about $22.6 million at the close of
2012 is projected to remain well within the city’s formal fund balance
policy to maintain general fund reserves at about 27% of spending.
The city’s overall debt burden remains very high at nearly $11,000 per
capita and 12.2% of market value. Debt levels primarily reflect
obligations of overlapping taxing units including the City of Commerce
City Northern Infrastructure General Improvement District (the
district). This district, a special taxing unit and blended component
unit of the city, has over $90 million in outstanding voter-authorized
general obligation bonds. The city’s debt amortizes very slowly with
less than 20% maturing in the next 10 years and includes the $30.9
million COPs and nearly $60 million in sales tax bonds. Fitch notes that
credit risk tied to the city’s debt profile is somewhat moderated by the
lack of additional borrowing plans.
Located in Adams County immediately northeast of Denver and west of the
Denver International Airport, the city is highly industrialized and has
a population of nearly 46,000. Leading employers in the city include
UPS, FedEx, United Food Service, and Suncor Energy. Wealth levels as
measured by per capita money income lag the state average by a
considerable margin and unemployment is typically above average. Due to
a concentration of construction job losses, the city’s unemployment rate
remains very high at 14.1% in August 2011, compared with the state’s
8.3% and national 9.1% during the same period. Economic growth during
the last decade capitalized on the city’s aggressive land annexation and
land-use policies that opened up a host of development opportunities
generally not available within the metro area. Following rapid growth in
the middle of the last decade, permit activity has declined
dramatically. The city’s market value fell by nearly 5% in 2009 and
posted a modest 1% increase in 2010.
Additional information is available at ‘
www.fitchratings.com ‘.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch’s
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates,
S&P/Case-Shiller Home Price Index, IHS Global Insight.
Applicable Criteria and Related Research:
–’Tax-Supported Rating Criteria’, dated Aug. 15, 2011;
–’U.S. Local Government Tax-Supported Rating Criteria’, dated Aug. 15,
2011.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842
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AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘
WWW.FITCHRATINGS.COM ‘.
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SOURCE: Fitch Ratings
Fitch Ratings
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Gabriela Gutierrez
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