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MOODY'S ASSIGNS Aa1 RATING TO THE CITY OF ASPEN, COLORADO'S GENERAL OBLIGATION REFUNDING BONDS, SERIES 2011; $14.0 MILLION OF DEBT AFFECTED

31 Aug 2011

Related ratings affirmed

Municipality
CO

Moody's Rating

ISSUE

RATING

General Obligation Refunding Bonds, Series 2011

Aa1

  Sale Amount

$2,420,000

  Expected Sale Date

09/07/11

  Rating Description

Unlimited Tax General Obligation Bonds

 

Opinion

NEW YORK, Aug 31, 2011 -- Moody's Investors Service has assigned a Aa1 rating to the City of Aspen, Colorado's General Obligation Refunding Bonds, Series 2011 in the estimated amount of $2.4 million. At this time, Moody's affirms the Aa1 rating on the city's parity debt outstanding in the amount of $11.6 million, along with the Aa2 rating on $23.1 million of outstanding sales tax revenue bonds and the Aa3 rating on the city's certificates of participation outstanding in the amount of $8.0 million. The current offering is secured by the city's full faith, credit, and unlimited property tax pledge. Bond proceeds will refund certain maturities of the city's outstanding General Obligation Refunding Bonds, Series 2003.

SUMMARY RATING RATIONALE

The Aa1 rating primarily reflects the city's large tax base and affluent socioeconomic measures, sound financial operations that include strong reserve levels, and a favorable debt profile.

STRENGTHS

- Internationally-renowned resort area supported by affluent residents and tourism

- Consistently strong reserve levels despite ongoing economic downturn

CHALLENGES

- Current tax base declines reflect national downturn in property values

- Reliance on tourism-related industries

DETAILED CREDIT DISCUSSION

INTERNATIONALLY RENOWNED SKI AREA; AFFLUENT TAX BASE

The city spans only four square-miles and is an internationally renowned ski resort area in central Colorado. The city is also known for other recreational activities that include film, food, and music festivals particularly during non-winter months that reduce seasonality for the local economy. The unemployment rate for Pitkin County was 7.9% as of June 2011 and historically is below both state and national levels despite the significant presence of tourism-related industries. As of the 2000 census, the city's per capita and median family incomes represented 188.4% and 140.5% of national levels, respectively, which is above the medians for Aa1-rated cities nationally.

The city's tax base grew heartily to a peak full market value (FMV) of $15.6 billion for collection year 2011. Following a period of new development and appreciation in existing property values, the city's tax base will decline by a sizable 26.3% in collection year 2012 to $11.5 billion (FMV) amid the national downturn in property values; the tax base decline for 2012 reflects market activity from January 2009 through June 2010 and is also the culmination of a biannual property revaluation cycle. Despite the annual decline for collection year 2012, the city's full market value still grew at a five-year average rate of 8.8% since 2007 and is expected to remain above the medians for similarly-rated peers. Moody's notes that the city's high property values and small full-time population lead annually to an affluent full value per capita, including $1.7 million for 2012 and historically is an exceptionally above the medians for similarly-rated peers.

SOUND FINANCIAL OPERATIONS INCLUDING SIZABLE RESERVES

The city continues to demonstrate sound financial operations by maintaining sizable reserve levels. Management's policy is to maintain general fund reserves of at least 25.0% of expenditures, which the city outperformed significantly in all recent years. Further, the city maintains an asset management fund for pay-go capital projects financed in part with transfers from the general fund. Including unrestricted reserves available in the asset management fund, the combined available reserves attributed to the general fund averaged 47.9% of revenues over the last five years, including available reserves of 52.1% of general fund revenues ($11.7 million) for fiscal 2010. The city's reserve levels are well above the national medians for Aa1-rated cities.

The city has not been immune to the effects of the ongoing national economic downturn. In particular, sales tax revenues are the city's largest general fund resource and receipts declined by 18.6% year-over-year in fiscal 2009 and then rebounded by only 6.1% in fiscal 2010. Although other revenue streams have been relatively resilient amid the downturn, management still prudently reduced expenditures to maintain fiscal balance. Specifically, management reduced employee headcount by approximately 11.0% through reductions in force and attrition since fiscal 2009 and also slowed spending related to pay-go capital projects. For fiscal 2011, management reports that sales tax revenues increased 4.0% year-over-year and also that development-related revenues are above budget while expenditures are in-line with expectations; officials expect that reserve levels will decline only modestly with a worst-case potential drawdown in reserves of up to $500,000. For fiscal 2012, preliminary budget expectations indicate that the city should maintain fiscal balance and reserve levels should remain stable relative to fiscal 2011 performance.

Moody's notes that the city is subject to Taxpayer Bill of Rights (TABOR) limitations related to property tax revenues. Previously, voters approved a measure allowing the city to retain property tax revenues in excess of TABOR for financing specific capital needs, but the measure expired in fiscal 2010 and officials do not intend to seek renewal of the provision. As such, the city is limited in the growth of property tax revenues to inflation plus a local growth factor. Also of note, the decline in the city's assessed valuation is a sizable 24.2% for collection year 2012 but property tax collections should be stable for the year with the giveback of previously accrued temporary property tax credits.

FAVORABLE DEBT PROFILE

The city's debt profile is favorable given a low direct debt burden and limited future borrowing plans. Payout is above average for the city's long-term debt at 60.3% in ten years. The city's direct debt burden is only 0.3% and well below the medians for Aa1-rated cities nationally. Also of note, the lease burden related to debt service for the city's outstanding certificates of participation is only 2.7% of general fund revenues for fiscal 2010, though it is expected that sub-lessees related of the Isis Theater will provide sufficient revenues to fund debt service payments. Lastly, the city's future debt plans are limited as officials may pursue $3.0 million of additional sales tax revenue bonds in 2012 to finance parks and recreation facilities.

WHAT COULD MAKE THE RATING GO UP

- Significant diversification of local economic activity

- Sizable and sustained tax base growth relative to similarly-rated peers

WHAT COULD MAKE THE RATING GO DOWN

- Deterioration of the city's financial position

- Substantial, additional tax base declines

KEY STATISTICS

Estimated population: 6,658

2012 full market value: $11.5 billion

Average annual growth in full market value (2007-2012): 8.8%

2012 full value per capita: $1.7 million

1999 per capita income: 188.4% of U.S. ($40,680)

1999 median family income: 140.5% of U.S. ($70,300)

Direct debt burden: 0.3%

Overall debt burden: 0.8%

Lease burden: 2.7% of fiscal 2010 general fund revenues

Payout of principal (10 years), long-term debt: 60.3%

Fiscal 2010 total general fund balance: 42.5% of general fund revenues ($9.5 million)

Fiscal 2010 available fund balance: 52.1% of general fund revenues ($11.7 million)

Pension funding, fiscal 2010: single-employer defined contribution plans are fully funded

Other postemployment benefits (OPEB) liability: not applicable

PRINCIPAL METHODOLOGY

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, parties not involved in the ratings, and confidential and proprietary Moody's Investors Service 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

Patrick Liberatore
Analyst
Public Finance Group
Moody's Investors Service

William Oh
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.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS Aa1 RATING TO THE CITY OF ASPEN, COLORADO'S GENERAL OBLIGATION REFUNDING BONDS, SERIES 2011; $14.0 MILLION OF DEBT AFFECTED
No Related Data.
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