Fitch Rates Wasatch County, UT's Lease Rev Rfdg Bonds 'AA-'; Outlook Stable
Fitch Ratings has assigned its 'AA-' rating to the following Municipal Building Authority of Wasatch County, UT (the authority) obligations issued on behalf of Wasatch County, UT:
--$9.965 million lease revenue refunding bonds, series 2013.
Proceeds will be used to refund lease revenue refunding bonds, series 2003, 2010, and 2012 and fund a debt service reserve. The bonds are expected to sell via negotiation on or around Feb. 26.
The Rating Outlook is Stable.
The bonds are secured by lease payments from the county to the authority subject to annual appropriation. The leased assets consist of court facilities; a 138,999 square-foot recreational center; and event center facilities (48,000 square-foot indoor arena and an outdoor arena). Replacement costs for the combined assets are $37.5 million. The assets are overcollateralized and cross-collateralized.
KEY RATING DRIVERS
STRONG FINANCIAL PROFILE: The rating reflects the county's strong financial profile, which include consistently high reserve levels, two consecutive years of operating surpluses, and a degree of revenue flexibility.
STABLE REVENUES: County revenues have remained fairly stable through the downturn despite a combined 17% contraction in its tax base due to automatic annual adjustment of the tax rate. Recent housing data shows listing prices about flat from prior year levels, which may indicate assessed value (AV) stabilization.
DIVERSIFYING ECONOMY: The rural bedroom community benefits from its proximity to Salt Lake City and Provo and continues to diversify with high-end resort development given its year-round recreational offerings.
LONG-TERM AV INCREASE: Potential exists for long-term increases in AV given the amount and type of planned development. The county is less than one-half built out and much of the new development is expected to be high-end homes and resorts/hotels.
FAVORABLE DEBT PROFILE: Debt levels are moderate but amortization is rapid. Carrying costs are low, pensions are well funded, and future debt plans are minimal.
GENERAL FUND OBLIGATIONS: The lease revenue bonds are payable solely from any legally available funds. Although only some of the assets are considered essential, they are strengthened by overcollateralization and cross-collateralization.
MAINTENANCE OF FINANCIAL/ECONOMIC PROFILE: The rating rests on maintenance of a strong financial profile and continued economic improvements.
The county encompasses 1,194 square miles and 24,417 residents in central Utah approximately 45 miles southeast of Salt Lake City and 30 miles east of Provo. Population growth has been rapid, with the county seat, Heber City rated among the fastest growing small cities in the nation. The growth reflects the easy access to the labor markets of Salt Lake City and Provo as well as a growing secondary home market.
The county's three reservoirs, mountainous terrain, and large amount of open land (85% is public land is owned by the national forest service and state) provide ample recreational opportunities, including hiking, fishing, and skiing. Recent and planned development centered on access to Deer Valley Ski Resort includes the St. Regis Hotel, with the highest average room rate in North America, and a year-round resort for military personnel, expected to be completed by 2015. In addition to hotel development, high-end residential planned communities, including Deer Crest and Red Ledges, have considerable additional capacity for development.
STRONG FINANCIAL PROFILE
The county's unrestricted fund balance (committed, assigned, and unassigned) at year-end fiscal 2011 was an impressive 41% of spending and transfers and has consistently remained above 26% each of the prior four years. For fiscal 2012 management projects a $1 million surplus, which would mark the third consecutive year of surpluses. The county has achieved its informal policy to maintain a fund balance of 30% of prior year revenues in each of the last six years.
The county's revenues are fairly diverse, with property tax accounting for 47% of revenues, charges for services 19%, intergovernmental 16% (primarily composed of federal in-lieu tax payments), and sales taxes 9%. Total general fund revenues last declined in fiscal 2009 by 3.5% primarily due to reduced sales tax revenues but have since rebounded with a 13% increase through fiscal 2011 compared to a 3.2% increase in expenditures.
The county has cut expenditures over the last several years, mostly through elimination of positions, limiting remaining expenditure flexibility. However, the county may have additional revenue raising ability as it has not increased property tax rates apart from automatic adjustments to account for AV fluctuations since 2003. Current rates are comparable to surrounding communities and lower than Salt Lake County.
The rural bedroom community benefits from its proximity to Salt Lake City and Provo and continues to diversify given its unique year-round recreational offerings. After increasing rapidly during the housing boom with 27% in 2008 alone, AV fell 17% through fiscal 2011. Management believes the tax base has hit bottom and will benefit going forward from various planned developments, many of which are in the early stages. In addition, home prices county-wide are flat year over year and up 17% for Heber City.
Concentration is low, with the top 10 taxpayers accounting for 6.5% of AV. However, eight of the top 10 are real estate developers. Three are related to Deer Crest, which is a private development offering homes in the $3 million - 30 million range. The second largest taxpayer, Red Ledges, is a private high-end community in Heber Valley that includes a Jack Nicholas designed golf course and is less than 8% built out. The concentration should diminish over time as homes are sold.
FAVORABLE DEBT PROFILE
Overall county debt is moderate at approximately $3,800 per capita and 2.0% of market value. Amortization is above average with 64% of principal retired within 10 years. Carrying costs (debt and pension) are low at 14.3% and the county does not provide other post-employment benefits.
The county participates in the adequately-funded Utah Retirement System pension plan. The county contribution rate for general employees was 13.77% for the last six months of fiscal 2011 and for public safety employees was 28.82% in calendar year 2011.
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.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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