Fitch Affirms Parmer County Hospital District, Texas' Limited Tax GOs at 'BBB'

Business Wire, March 13, 2009

NEW YORK -- In the course of routine surveillance, Fitch Ratings affirms Parmer County Hospital District, TX's (the district) $12 million in outstanding limited general obligation (GO) bonds, series 2007 at 'BBB'. The Rating Outlook is Stable.

The 'BBB' rating reflects the district's limited and predominantly rural tax base, its high taxpayer concentration, and the slow principal amortization of the bonds.

Located in the panhandle plains region of Texas, the district provides financial support to the local critical access hospital on behalf of a population of approximately 8,000 residents. In 2006, the district's voters approved by high margins both the issuance of these bonds and an increase in the local property tax cap in order to construct and service debt for a new hospital. The district contracts with a non-profit group, Parmer County Community Hospital Inc., (the hospital) to run its health care facilities, and provides operating support for them. The district and the hospital are governed by the same board. All bonds are secured by the general obligation pledge of the district, limited to $.50 per $100 of assessed value. The district has considerable flexibility against this limit, currently levying at $.3135 ($.1629 for operations, $.1506 for debt service). The district has a very high 6.1% ratio of overall net debt to market value, and this bond issue amortizes principal slowly, retiring 28% in the next ten years.

The district added to audited general fund balance in fiscal year (FY) 2007, and unaudited FY 2008 financial statements report a further improvement in financial position, to $0.5 million in fund balance (36.4% of spending and transfers out). The district budgets conservatively for tax collections, and management reports it is on track to meet FY 2009 budget projections for tax revenue. The hospital runs on adequate financial margins, with its annual support from the district. It also shows signs of a strengthened financial position, producing its first operating surplus in FY 2007. The hospital would have ended FY 2008 with a strengthened cash position, had it not chosen to pay off $660,000 in direct debt.

The district's tax base grew strongly from 2002 to 2008 at an average annual rate of 6.5%, although it remains a predominantly rural area. The tax base also has particular exposure to one company, Cargill Inc. meat processors, which accounts for 25% of the district's total assessed valuation. Cargill has recently invested in its local facilities, adding $20 million in taxable value since 2006, and the district reports no material local job losses at the company. Cargill is a unit of Cargill, Inc., which has an Issuer Default Rating of 'A' from Fitch. The county's unemployment rate is unusually low for a rural area, measured at just 3.3% for December 2008.

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