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New Issue:

MOODY'S ASSIGNS A1 RATING TO CITY OF BURIEN, WASHINGTON'S LTGO BONDS; $8.7M AFFECTED

11 Aug 2011

MOODY'S AFFIRMS A1 RATING ON $20.7 MILLION OF PARITY DEBT

Municipality
WA

Moody's Rating

ISSUE

RATING

Limited Tax General Obligation and Refunding Bonds, Series 2011

A1

  Sale Amount

$8,650,000

  Expected Sale Date

08/16/11

  Rating Description

Limited Tax General Obligation Bonds

 

Opinion

NEW YORK, Aug 11, 2011 -- Moody's Investors Service has assigned an A1 rating to the City of Burien's Limited Tax General Obligation and Refunding Bonds, 2011 expected to be issued in the approximate amount of $8.7 million. At this time, Moody's affirms the A1 rating on the city's outstanding $20.7 million of LTGO debt. Proceeds will be used to pay for various road and street improvements, pay costs associated with a legal settlement, refund a portion of previously issued LTGO debt for annual debt service savings, and prepay a previously issued Limited Tax General Obligation Bond Anticipation Note, Series 2011. The bonds are secured by the full faith and credit of the city within the constitutional and statutory limitations of non-voter approved debt.

SUMMARY RATING RATIONALE

The A1 rating is based primarily on the city's moderately sized tax base located near Seattle, average socioeconomic indicators, manageable debt levels, and conservative financial management.

STRENGTHS

-Proximity to employment opportunities in Seattle

-Annexation provides city with additional development opportunities

CHALLENGES

-Somewhat high unemployment rate

-Reserve levels below similarly-rated cities nationally

SMALL CITY BENEFITS FROM ITS LOCATION JUST SOUTH OF DOWNTOWN SEATTLE

The city is a mature residential community which benefits from its location in the Puget Sound area and proximity to downtown Seattle (UTGO rated Aaa, negative outlook) and SeaTac Airport. Socioeconomic levels for the city are consistent with state norms. Between 2004 and 2009 the city's assessed value increased a healthy 9.0% annually supported by mostly in-fill construction given the city's mostly built-out status. In 2010, AV declined a significant 15.0% due to the regional slowdown in construction activity combined with falling housing and condominium prices. Largely due to an annexation in April 2010, the city's 2011 AV increased nearly 25% to a sizeable $4.6 billion; management notes, absent the annexation, AV growth would have been nearly flat. Full value per capita is healthy at $95,976. As of June 2011, the city's unemployment rate was at its highest rate since at least 2001 at 9.7%, but only slightly above the state (9.3%) and nation (9.3%).

Prior to the annexation, the city was essentially built out. Now, combined with ongoing downtown redevelopment projects, the additional developable land should help make it an increasingly attractive location given local growth management laws and overall development constraints in the Seattle area.

MANAGEABLE DEBT POSITION; NO NEAR TERM BORROWING PLANNED

The city's direct debt burden is low, at 0.7%, while overall debt burden is well above average at 4.0%, largely reflecting the presence of overlapping school district debt. Proceeds will be used to pay for various road and street improvements, pay costs associated with a legal settlement, refund a portion of previously issued LTGO debt for annual debt service savings, and prepay a previously issued Limited Tax General Obligation Bond Anticipation Note, Series 2011. Although secured by the full faith and credit of the city within the constitutional and statutory limitations of non-voter approved debt, a portion of previously issued LTGO debt is secured by other revenue sources. Not including other available revenues to pay portions of previously issued debt, Moody's notes peak annual debt service on all LTGO debt represents an above average 13.5% of fiscal year 2010 general fund revenues. Payout of all LTGO debt is average at 47.5% in ten years. All of the city's outstanding debt is fixed rate. Management does not plan to issue additional debt within the next three to five years.

CONSERVATIVE FINANCIAL MANAGEMENT

City finances are characterized by conservative fiscal policies and careful budgeting practices. The city's formal reserve policy was recently amended and calls for a reserve of no less than 10% of ongoing operating revenues. In fiscal year (FY) 2008, the general fund balance increased to a solid 21.1% of general fund revenues ($3.77 million) as a result of a transfer-in from the Cumulative Reserve Fund (the city's prior 'Rainy Day fund') and a transfer-in of a portion of the city's Capital Projects Reserve fund to pay for a one-time settlement payment; the city was reimbursed that payment amount. The FY 2009 general fund balance dropped somewhat to 19.8% of general fund revenues ($3.1 million) largely as a result of declining sales tax revenues. FY 2010 general fund operations benefitted from increased revenues including various one-time sources such as including grant funds and an insurance recovery, as well as increased recurring revenue sources including sales taxes. The FY 2010 general fund balance was equal to 18.5% of general fund revenues ($3.4 million), slightly below the median for similarly-rated cities nationally.

The city's general fund operations are supported by a relatively diverse revenue stream including sales taxes (28%), property taxes (24%), and utility taxes (15%). The FY 2011 ending general fund balance is expected to end at $3.7 million.

As required by state law, the city has consistently contributed the full annually required contribution for its participation in the state's three pension plans (PERS I, PERS II, and PERS III). Of these three plans, all but one employee are members of Plan II and Plan III and these two plans are funded in excess of their actuarial requirement (116% as of 2009). The city offers no other post employment benefits (OPEB) and has no OPEB liability.

WHAT COULD MAKE THE RATING GO UP

-Significant increase in assessed valuation

-Sustained general fund reserve levels well above similarly rated cities nationally

WHAT COULD MAKE THE RATING GO DOWN

-Prolonged declines in assessed valuation

-Deterioration of financial operations and reduced reserve levels

KEY STATISTICS

Population, 2011: 47,660

2011 full value: $4.57 billion

Median family income, 1999: $53,814 (100.1% of state)

Direct debt burden: 0.7%

Overall debt burden: 4.0%

Payout, 10 years: 47.5%

General Fund balance, 2010: $3.4 million (18.5% of general fund revenues)

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings and public information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Analysts

Dan Steed
Analyst
Public Finance Group
Moody's Investors Service

Andrea Unsworth
Backup Analyst
Public Finance Group
Moody's Investors Service

Matthew A. Jones
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service, Inc.
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USA

MOODY'S ASSIGNS A1 RATING TO CITY OF BURIEN, WASHINGTON'S LTGO BONDS; $8.7M AFFECTED
No Related Data.
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