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New Issue:

MOODY'S ASSIGNS Aa2 UNDERLYING RATING TO SOUTHERN SANDOVAL COUNTY ARROYO FLOOD CONTROL AUTHORITY'S [NM] $2.5 MILLION GENERAL OBLIGATION BONDS, SERIES 2011

17 Jan 2011

Aa2 RATING AFFECTS $26.7 MILLION IN OUTSTANDING PARITY DEBT, INCLUDING THE CURRENT SALE

Municipality
NM

Moody's Rating

ISSUE

RATING

General Obligation Bonds, Series 2011

Aa2

  Sale Amount

$2,500,000

  Expected Sale Date

01/19/11

  Rating Description

General Obligation Unlimited Tax

 

Opinion

NEW YORK, Jan 17, 2011 -- Moody's Investors Service has assigned a Aa2 underlying rating to Southern Sandoval County Arroyo Flood Control Authority's (NM) $2.5 million General Obligation Bonds, Series 2011. Concurrently, Moody's has affirmed the Aa2 underlying rating on the authority's $24.3 million in outstanding parity debt. Proceeds from the sale will be used to finance improvements and extensions to the flood control system.

RATINGS RATIONALE

The bonds are secured by the authority's full faith and credit and are payable from ad valorem taxes to be levied, without limitation as to rate or amount, against all taxable property within the authority. The Aa2 rating reflects the authority's sizable tax base, sound financial performance and a moderate debt profile.

STRENGTHS

*Stable tax base experiencing healthy growth

*Conservative fiscal management and currently solid financial reserves

WEAKNESSES

*Maintenance and operating tax rate limitation

TAX BASE GROWTH TRENDS SLOW, BUT REMAIN HEALTHY

Southern Sandoval County Arroyo Flood Control Authority provides storm water drainage facilities for the southern portion of Sandoval County (Aa2 general obligation rating), including the cities of Rio Rancho (Aa2), Corrales, and Bernalillo. As a result of healthy development throughout the authority, the assessed value has grown at an average annual rate of 16.9% over the past five years to reach $2.7 billion in fiscal 2011, derived from a full value of $8.0 billion. (Assessed value is 33.3% of full value for New Mexico municipalities.) In fiscal 2008, the assessed valuation increased an impressive 47%; officials report the majority of fiscal 2008 growth is attributable to the appraiser's revaluation of property to become more aligned with market values. Officials estimate the City of Rio Rancho comprises 90% of the authority's land area, which also contributes to the bulk of assessed valuation expansions. Although residential development has slowed, the authority is experiencing commercial and institutional development. Rio Rancho's new City Hall and City Centre have spurred retail and mixed use development including entertainment and shopping venues and a multi-purpose arena. Presbyterian Healthcare Services is constructing a 120-bed hospital, which is expected to open in early 2011 and create more than 600 jobs. The University of New Mexico Sandoval Regional Medical Center is also building a hospital and is expected to open in March 2012. Given current economic development and expected spin-off development, Moody's expects tax base expansion will continue over the medium term; however, we believe the pace of growth will trend below historical levels.

STABLE FINANCIAL OPERATIONS EXPECTED TO CONTINUE

The authority has consistently operated with prudent fiscal policies and conservative financial management practices. State regulations require that special districts, such as the authority, maintain one-twelfth of operating expenditures in reserves. Historical levels of reserve well-exceed this requirement. The FYE 2010 (June 30) General Fund balance was $1.4 million, or a healthy 68.5% of General Fund revenues. The fiscal 2011 budget includes approximately $1.1 million of appropriated fund balance to cover unexpected flood control damages, but officials anticipate grant revenues will cover a large portion of the one-time costs and the draw from reserves is expected to be significantly less than budgeted. The authority has historically experienced positive variance in budget to actual performance, reflective of management's conservative budgeting practices. Moody's notes that if actual fiscal 2011 results reflect the current budget (depleting General Fund balance to less than $300,000), financial reserves would be inconsistent with similarly rated credits, resulting in negative pressure on the Aa2 rating.

Property tax revenues comprised 99.3% and 99.9% of operating revenues in fiscal 2009 and fiscal 2010, respectively. Customary for this type of single-purpose district, the authority's debt service payments accounted for a high 56.1% of expenditures in fiscal 2008 and 58.1% of expenditures in fiscal 2010. The authority is limited to levying $1.00 per $1,000 of assessed valuation for maintenance and operations (M&O) expenditures, whereas the debt service tax rate is unlimited. The fiscal 2011 M&O tax rate is $0.784, providing flexibility in the event of a decline in taxable values. However, officials report that the Board is committed to maintaining the tax rate at current levels. Given the solid level of reserves coupled with demonstrated conservative fiscal management, Moody's believes the authority's stable financial position will continue over the medium term.

MANAGEABLE DEBT PROFILE

The authority's bonding capacity was doubled in 2009 when the New Mexico Legislature increased the statutory maximum indebtedness to $60 million from $30 million. Including the current offering, the authority's debt burdens are modest at 0.3% direct and 3.2% overall, both expressed as a percentage of fiscal 2011 full value. Amortization is rapid with 85.0% of principal retired in ten years. The current new money sale is the third installment of the $18 bond authorization approved by 60% of voters in November 2008. Officials report plans to issue approximately $2.5 million in 2013, noting there is no expiration to the debt authorization. Based on reported plans for future debt issuance and the favorable rate of amortization, Moody's believes the authority's debt profile will remain manageable over the medium term.

WHAT COULD CHANGE THE RATING-UP:

*Significant tax base expansion and strengthened socioeconomic profile

*Continued trend of operating surpluses resulting in bolstered financial reserves

WHAT COULD CHANGE THE RATING-DOWN:

*Trend of tax base contraction

*Depletion of financial reserves

KEY STATISTICS

Estimated 2011 Population: 100,000

FY 2010 Full Value: $8.0 billion

FY 2011 Assessed Value: $2.7 billion

Per Capita Income (Sandoval County, 2000 U.S. Census): $19,174 (111.1% of state; 88.8% of U.S.)

Direct Debt Burden: 0.3%

Overall Debt Burden: 3.2%

Principal Payout (10 years): 85.0%

FY 2010 General Fund Balance: $1.4 million (68.5% of General Fund revenues)

Post-sale Parity Debt Outstanding: $26.7 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

Leslie Lukens
Analyst
Public Finance Group
Moody's Investors Service

Kristin Button
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service
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New York, NY 10007
USA

MOODY'S ASSIGNS Aa2 UNDERLYING RATING TO SOUTHERN SANDOVAL COUNTY ARROYO FLOOD CONTROL AUTHORITY'S [NM] $2.5 MILLION GENERAL OBLIGATION BONDS, SERIES 2011
No Related Data.
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