SAN FRANCISCO--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AAA' rating to the following Port of Seattle (WA) limited tax general obligation (LTGO) bonds:
--$30.3 million LTGO bonds, 2011 (taxable);
--$76.7 million LTGO refunding bonds, 2011 (AMT).
The bonds are expected to sell via negotiation on Feb. 9, 2011.
In addition, Fitch affirms the following ratings:
--$255 million LTGO bonds at 'AAA'.
The Rating Outlook is Stable.
RATING RATIONALE:
--Strong security is provided by an essentially unlimited ad valorem property tax on a large, wealthy and diverse tax base.
--The port is coterminous with King County (ULTGOs rated 'AAA' by Fitch) which, despite a history of economic cyclicality and current pressure on its property and employment markets, has a sound economic base due to its role as a regional economic center, above-average wealth indicators, strong taxable assessed valuation (TAV) per capita, and low taxpayer concentration.
--Tax supported debt levels are low and amortization of LTGO debt is about average; however, debt levels will rise as the port has committed to contributing not to exceed $300 million to Seattle's Alaska Viaduct replacement project, including approximately $25 million expended to date.
--Port finances have historically been healthy and are projected to be healthy through the forecast period ending in 2016. Active management and conservative planning have preserved the finance and operating profiles of the port.
--The port is one of the nation's largest container ports, operating in the extremely competitive West Coast port environment, with shippers continually making adjustments between the various ports and all-water service to the gulf and east coast.
KEY RATING DRIVERS:
--Stability is provided by the continued strong financial operations of both the airport and seaport.
--Maintaining ample tax levy capacity for repayment of the bonds in light of the plans to issue additional debt.
SECURITY:
Full faith, credit and resources supported by a covenant to levy ad valorem taxes in the port district (King County) as permitted without a vote.
CREDIT SUMMARY:
The port district's tax base is large, diverse, and wealthy compared to state and national averages. Despite the downward tax base pressure, TAV per capita remains high and taxpayer concentration is very low. Income levels are 20%-30% above state and national and the poverty rate is lower. Nonetheless, the county has been impacted by the national recession, with unemployment at 8.4% in 2010 compared to a low of 3.8% in 2007. In addition, the port's TAV declined 3.8% in 2011 after an 11.6% decline in 2010, bringing the TAV below the 2008 level. However, the port's taxing limit for debt service is tied to total levy increases, rather than any taxing rate.
The port's levy (for general purposes and debt service) may be increased by 1% per year plus new construction, and is only limited as to rate for the general portion which is well under the limit. The port also retains some banked levy capacity (about $15 million) from previous years when it did not raise the levy by the permitted amount. Additional cushion is provided by management's conservative use of the tax levy and LTGO issuance, maintaining a policy of leveraging no more than 75% of the levy for debt service. For fiscal 2011, the GO bond debt service is equal to about 55% of the levy. The remainder is budgeted, as is typical, for non-revenue generating seaport and real estate infrastructure, environmental mitigation, and the regional freight mobility initiative. The port is a partner in Seattle's Alaskan Way Viaduct replacement project and has committed to providing $300 million for the project, most of which is expected to be bond funded after the 2011A bonds are repaid in 2015.
The port's overall fiscal strength is evident in its diverse operating revenue stream, which for 2009 was led by the airport ($328.2 million, or 73%), seaport ($90.7 million, or 20%) and real estate ($30.1 million, or 7%) divisions. The ad valorem property tax is non-operating revenue and totaled $76 million. After dipping 6% in 2009, the port expects operating revenue to be up about 5% as container volume at the seaport rebounded with 35% growth and enplanements increased an estimated 1%. In addition to winning new service to Seattle from another regional seaport, the port points to numerous ad hoc calls and larger ships reflecting some recovery in the national economy as responsible for the rebound. With expenses rising, the net operating income is forecast to see an increase of 4.4% in 2010 compared to essentially flat in 2009. The port is budgeting for modest growth in revenue and expenditures in 2011.
Direct debt levels are modest and slightly reduced since Fitch's last review, at a low 0.1% of market value. Overall debt is stable at 1.8% of market value and $3,268 per capita. The port has always issued fixed rate, level debt service LTGO bonds and, as a result, has a declining debt service profile.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc., IHS Global Insight, Underwriter, Bond Counsel, Underwriter Counsel.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated 16 Aug. 2010.
--'U.S. Local Government Tax-Supported Rating Criteria', dated 08 Oct. 2010.
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
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