Fitch Rts Corpus Christi, TX Certificates of Obligation `AA-'

Business Wire, Sept 5, 2000

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 5, 2000

Fitch assigns its `AA-' rating to the $13,990,000 combination tax and revenue certificates of obligation, series 2000 of Corpus Christi, Texas. Additionally, the `AA-' rating is assigned to the city's outstanding $84,876,424 general obligation (GO) bonds and $29,075,000 certificates of obligations (COs). The COs are general obligations of the city, payable from a limited ad valorem tax, not to exceed $0.68 per $100 assessed valuation (AV), and solid waste system revenues remaining after payment of all operations and maintenance (O&M) expenses. Sale of the COs is scheduled on or about Sept. 12 through negotiation in a syndicate managed by A. G. Edwards & Sons Inc. The COs are dated Sept. 1, 2000 and mature March 1, 2002-2020, with certificates maturing on and after March 1, 2012 subject to optional redemption at par plus accrued interest on March 1, 2011, or any date thereafter. Proceeds of the COs will be used for a new landfill site acquisition and improvements, as well as street improvements.

The `AA-' rating represents the city's stable tax and economic base, low direct debt burden that is rapidly amortized and competent management team. Also incorporated in the rating is the somewhat restrictive tax rate limitation for combined O&M and debt service purposes and the marginal position of the general fund. In the recently adopted fiscal 2001 budget, the city council approved the elimination of 94 general fund positions, generating expenditure reductions of approximately $2.1 million, setting the foundation for increased future operating results and fund balances. Growth in assessed valuation has averaged 3.8% annually for the past five years, allowing the city to manage finances and provide services while maintaining a cushion beneath the tax cap.

Corpus Christi is the eighth largest city in Texas and largest on the coast, with an estimated 2000 population of 297,090. The local economic base consists primarily of petrochemical and shipping, tourism, agriculture and the military. The city also serves as a regional health care and education center for the lower gulf coast area. The Port of Corpus Christi ranks as the sixth largest in the nation from a tonnage standpoint and one of the top 20 in the world. Petrochemical shipping accounts for about 89% of the tonnage through the port, with several large refineries located in the ship channel. Padre Island national seashore, with 68 mile of beach, and Mustang Island state park are leading attractions in the tourism sector. The Corpus Christi Army Depot is the largest industrial employer in south Texas and U.S. Navy installations in the area consist of two air stations, one in Corpus Christi and the other 45 miles away in Kingsville, and the mine warfare fleet across the bay in Ingleside. The June 2000 unemployment rate of 7.7% was higher than that of both the state and nation and 1998 median household buying income figures trail the state by 5% and U.S. levels by 8%.

Prior to the fiscal 2001 budget process, the city prepared its initial five-year forecast for the general fund, which set the framework for staff and council deliberations to chart a course to strengthen finances. Fiscal 1999 ended with a $3.2 million total general fund balance, representing 2.5% of expenditures and transfers, with a mere $980,000 unreserved. Preliminary figures for fiscal 2000 project an ending fund balance of $2.8 million. The adopted budget for fiscal 2001 forecasts an ending general fund balance of $4.5 million, or 3.5% of expenditures. By the end of fiscal 2002, the general fund ending balance is expected to exceed the 5% minimum recently established by council action. The debt service fund ended fiscal 1999 with a $12.9 million balance, representing 63% of expenditures, and a $11.6 million level is expected for fiscal year-end 2000. The property tax rate, which is limited to $0.68 per $100 AV for both O&M and debt service on GO bonds authorized prior to April 1993, has remained fairly stable for the past eight years. The range for the rate has been from a low of $0.6127 in fiscal 1995 to a high of $0.6241 in fiscal 1999.

The direct tax burden is very low at $321 per capita and 1.1% of market value. The debt is rapidly amortized, with 83% retired in 10 years. Overall debt is moderate at $945 per capita and 3.1% of market value, with the debt of Corpus Christi Independent School District being the primary component. The city does not plan additional tax supported debt issuance for the remainder of 2000, however does plan a ballot initiative for approximately $30 million to $40 million for primarily streets, drainage and park projects. This new debt proposal would be subject to and payable from a separate $1.50 per $100 AV limitation that was implemented by the voters in April 1993 for any new GO authorization.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.