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MOODY'S ASSIGNS Aa1 UNDERLYING RATING TO THE CITY OF AMARILLO'S (TX) $3.75 MILLION COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2011A AND $2.26 MILLION COMBINATION TAX AND TAX INCREMENT CERTIFICATES OF OBLIGATION, SERIES 2011B

05 Jan 2011

RATING AFFECTS $49.61 MILLION IN MOODY'S RATED DEBT

Municipality
TX

Moody's Rating

ISSUE

UNDERLYING
RATING

RATING

Combination Tax and Revenue Certificates of Obligation, Series 2011A

Aa1

Aa1

  Sale Amount

$3,750,000

  Expected Sale Date

01/13/11

  Rating Description

General Obligation Limited Tax

 

Combination Tax and Increment Certificates of Obligation, Series 2011B

Aa1

Aa1

  Sale Amount

$2,260,000

  Expected Sale Date

01/13/11

  Rating Description

General Obligation Limited Tax

 

Opinion

NEW YORK, Jan 5, 2011 -- Moody's Investors Service has assigned a Aa1 underlying rating to the City of Amarillo's (TX) $3.75 million Combination Tax and Revenue Certificates of Obligation, Series 2011A and $2.26 million Combination Tax and Tax Increment Certificates of Obligation, Series 2011B. Concurrently, we have affirmed the Aa1 underlying rating on $43.6 million in outstanding parity debt. The rating also takes into account an additional $108.6 million of outstanding parity debt not rated by Moody's. Proceeds from the sale of the Series 2011A Certificates will be used for improving and equipping the Ross Rodgers Golf Course and proceeds from the sale of the Series 2011B Certificates will be used for improvements related to the city's Tax Increment Reinvestment Zone #1.

RATING RATIONALE

The rating reflects the city's sizable and relatively stable tax base with wealth levels slightly below state averages. The rating also reflects the city's modest debt burden and sound financial management with maintained healthy reserve levels. The Series 2011A Certificates constitute direct obligations of the city, payable from a combination of the levy and collection of a continuing direct annual ad valorem tax levied on all taxable property within the city, within the limits prescribed by law and a limited pledge of the net revenues of the city's Waterworks and Sewer System. The Series 2011B Certificates constitute direct obligations of the city payable from a combination of the levy and collection of a continuing ad valorem tax levied on all taxable property within the city, within the limits prescribed by law and a pledge of tax increment revenues.

SIZEABLE AND RELATIVELY DIVERSE TAX BASE REMAINS STABLE

Moody's believes the city's sizeable and relatively diverse tax base will continue to remain stable over the medium term given its historic role as a regional trade center in the Northwest Texas Panhandle and continued population growth. Despite a recent slowing of previously healthy taxable value growth, the city's taxable value remains stable. Over the last five years the city's tax base has increased an average of 5.1% annually reaching $10.0 billion in fiscal 2011. Officials report that modest development in the city continues including redevelopment of a small shopping center, the opening of a Courtyard Marriot hotel in the downtown area, and development of several other hotels. Officials expect modest growth to continue in the near term. The top ten taxpayers are relatively diverse comprising only 5.4% of the total tax base and include a hospital, utility, and retailers. Population has increased a healthy 13.2% since the 2000 U.S. Census to an estimated 196,472 residents in 2010. Wealth levels are slightly below average as measured by per capita income and median family income (from 2000 U.S. Census) that approximate 94.9% and 92.7% of the state averages, respectively. The October 2010 unemployment rate of 5.3% remains well below the state of 7.9% for the same time period.

STRONG FINANCIAL MANAGEMENT WITH MAINTAINED RESERVE LEVELS

Moody's expects the city's financial performance to remain stable in the near term given historically stable financial operations and management's commitment to maintain healthy reserve levels. The General Fund balance at FYE 2009 (September 30) was $37.3 million, or a healthy 27.8% of revenues. Fiscal 2009 operating fund revenues were largely derived from sales tax collections (35.2%), and property taxes (23.5%), and various charges for services (20.3%). Despite only modest growth in taxable value and an approximate 4% decline in sales tax collections for fiscal 2010, management anticipates a General Fund balance of approximately $41 million (or 30.8% of General Fund revenues) at FYE 2010. City officials contained expenditures in fiscal 2010 with the implementation of a 3% reduction in budgeted expenditures from all departments and no increases in salaries. At FYE 2009 the city's net pension obligation was approximately $2.76 million and net other post employment benefit obligation (OPEB) was approximately $15.25 million. Moving forward city officials project to maintain a target of 90 days of expenditures held in reserves and transfer anything over the target to capital projects. Future credit reviews will continue to examine management's ability to closely monitor revenues and make necessary adjustments in expenditures in order to maintain ample financial reserves. We believe maintenance of healthy reserves is a strength of the City's financial position which is incorporated into the Aa1 rating.

MODEST DEBT BURDEN REMAINS MANAGEABLE

We expect the district's debt burden will remain manageable in the near term. The city has $158.3 million in post-sale general obligation debt and $104.4 million of the city's outstanding general obligation debt has historically been paid from net revenues of the city's Water and Sewer System. The direct debt burden of the city is below average at 0.5% direct and elevated when including overlapping debt at 2.8%, due mainly to overlapping debt of the local school district. The city's direct debt burden increases to a still manageable 1.57% when including debt which is supported by the Water and Sewer System. Debt burdens are calculated using fiscal 2011 taxable values. Payout is slightly below average with 52.5% of principal retired in ten years. City officials do not anticipate the need for future borrowing in the next 18 months but do have plans for an indoor recreational facility, an anticipated $6.1 million project that will be funding through various means. The city does not have any variable rate debt and is not party to any swap agreements.

WHAT COULD CHANGE THE RATING-UP:

* Substantial tax base growth

* Maintaining healthy General Fund reserves

* Improved demographic profile

WHAT COULD CHANGE THE RATING-DOWN:

* Tax base contraction

* Deterioration of General Fund reserves

KEY STATISTICS:

2010 Estimated Population: 196,472

FY 2011 Full Value: $10.0 billion

Full Value per Capita: $51,181

Per Capita Income (2000 U.S. Census): $18,621 (94.9% of state; 86.3% of U.S.)

Direct Debt Burden: 0.5%

Overall Debt Burden: 2.8%

Payout of Principal (10 years): 52.5%

FYE 2009 General Fund Balance: $37.3 million (27.8% of General Fund revenues)

Projected FYE 2010 General Fund Balance: $41.6 million (30.8% of General Fund revenues)

Post-sale Parity Debt Outstanding: $158.3 million

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings and public information.

Moody's Investors Service considers the quality of information available on the credit satisfactory for the purposes of assigning a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

James Hobbs
Analyst
Public Finance Group
Moody's Investors Service

Toby Cook
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS Aa1 UNDERLYING RATING TO THE CITY OF AMARILLO'S (TX) $3.75 MILLION COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2011A AND $2.26 MILLION COMBINATION TAX AND TAX INCREMENT CERTIFICATES OF OBLIGATION, SERIES 2011B
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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