NEW YORK--(BUSINESS WIRE)--In the course of routine surveillance, Fitch Ratings has affirmed the following Maryland National Park & Planning Commission's (MNCPPC or the commission) bonds:
--$76.2 million Prince George's County general obligation (GO) park acquisition and development bonds at 'AAA'.
The Rating Outlook is revised to Stable from Negative.
RATING RATIONALE:
--The 'AAA' rating reflects the GO pledge and creditworthiness of MNPPC and Prince George's County (the county). Given the double-barrel pledge, if at any point in the future the ratings of the entities diverge, the rating on the commission bonds should always reflect the higher of the two ratings.
--The Outlook revision to Stable reflects the commission's continued strong financial profile despite recent payments to the county. No future payments to the county are anticipated by either side and authorization for transfers requires state legislative approval.
--The commission lacks independent revenue raising authority as its operating budget is subject to approval by the county though this risk is tempered by its limited programmatic mission centered on the acquisition, operation, and maintenance of a sizeable and highly regarded regional parks system.
--Proceeds from a state-mandated limited ad valorem tax, levied county-wide, are dedicated to the repayment of bond principal and interest with significant flexibility remaining under the cap.
--Debt levels are low and the aggressive amortization of outstanding principal affords the commission future financing flexibility.
--The county's tax base benefits from its central location in the national capital region and its well-developed transportation infrastructure, attracting strong employment opportunities on vital government operations and higher education.
KEY RATING DRIVERS:
--Given the double-barrel pledge, Fitch will continue to monitor the general creditworthiness of the commission and county on an ongoing basis.
--Maintenance of financial resources and flexibility is a key rating driver for the commission, given the limitations of the its operating and governing structure.
SECURITY:
The bonds are general obligations of the commission, issued on the full faith and credit of Prince George's County. The bonds are payable in the first instance from proceeds of limited annual ad valorem taxes that the county is required to levy in the Maryland-Washington Metropolitan District in the county (the metropolitan district) pursuant to state law. These proceeds may be supplemented by annual ad valorem taxes levied upon all assessable property within the metropolitan district and ultimately, if necessary, by annual ad valorem taxes upon all assessable property within the corporate limits of the county.
CREDIT SUMMARY:
The commission is a bi-county agency, empowered to acquire, develop, maintain and administer a regional system of parks comprising nearly all of Prince George's County and Montgomery County. Each county appoints a planning board to the commission to facilitate, review and administer the matters affecting their respective counties. The commission's major source of funding is property taxes levied on an individual county basis. Separate accounts for each county are maintained within the commission's general fund for transparency purposes. Debt is issued separately for each county, not for the commission as a whole.
State law requires the county to assess a levy of at least $0.04 per $100 assessed value (AV) of all real property and at least $0.10 per $100 AV of all personal property located within the metropolitan district. The proceeds of this tax are pledged to payment of debt service on all commission bonds issued for the county's behalf, with any amount not needed for debt service available to the commission for its authorized purposes. The county has no claim to revenues generated by this tax. Maximum annual debt service (MADS) on the bonds consumes only a third of the minimum mandatory levy. Debt service is descending allowing for additional future flexibility.
Located adjacent to Washington, D.C., the county's economic base is centered on vital governmental bureaus and higher education, including Andrews Air Force Base and the University of Maryland. Economic development of the area continues with further progress on the $2 billion mixed-use National Harbor project along the Potomac River as well as recent developments in the hotel and retail areas which had historically been underrepresented sectors within the county. Total employment in the county has increased by over 1% in the past year, lowering the unemployment rate to 6.8% for March 2011, below the state and national averages. The recent national housing correction has led to significant decreases in the county's market values in recent years although the banked homestead tax credit was able to offset the entire decrease in fiscal 2011 and all but a small percentage for upcoming fiscal 2012. The county expects a 25%-30% aggregate decrease in values for the area being revalued for fiscal 2013 which may results in some decline in actual assessed value as the banked homestead exemption is tied to specific properties. Beginning in fiscal 2014, the county expects to return to assessed value growth.
MNCPPC's financial position remains strong despite recent pressure from state legislation. HB 1517 was enacted by the legislature in 2009 which required the commission to make two $30 million equal installment payments to the county in fiscal 2010 and fiscal 2011 to help ease the county's fiscal stress stemming from the current economic environment and its own revenue raising limitations. Despite these payments, the commission was able to retain structural balance in fiscal 2010 with a moderate $5.1 million use of reserves for capital projects. The unreserved fund balance totals $106.1 million, equal to robust 36.6% of spending. An additional $126.7 million of unreserved fund balance in the capital projects fund attributable to the district provides additional budgetary flexibility. Similar results are projected for fiscal 2011, with the commission anticipating the use of approximately $9.5 million of reserves, driven by $43 million for acquisition and development related capital needs. The fiscal 2012 budget has not yet been adopted. Neither MNCPPC or the county are anticipating future payments from the commission while such action would require state legislative approval.
Debt levels are low and are expected to decline further given the commission's rapid amortization rate and lack of plans for additional debt. The commission evaluates its capital needs with input from the county, the state, and local residents. The six year fiscal 2011-2016 capital improvement plan (CIP) totals $253.2 million with development projects accounting for slightly over 70% of all needs and acquisition projects making up the remainder. Amortization of current outstanding debt is quite rapid with over 90% of principal scheduled to be retired within the next 10 years. The commission has no plans to issue additional debt until at least fiscal 2014. Pension and other post-employment benefit (OPEB) benefits are well-managed.
For further information on Prince George's County, MD, see the press release dated May 26, 2011.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope and University Financial Associates.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 16, 2010;
--'U.S. Local Government Tax-Supported Rating Criteria', dated Oct. 08, 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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