HomeMy WebLinkAboutA009 - Moody's Rating11/09/98 10:07 ET REF: N0000611.0001 FRANDYS T0:5152395325 Page 1 of 2
ATTN: Ar. Steven Schainker
City o
MOODY'S ASSIGNS Aaa RATING TO CITY OF AMES' (IA) SERIES 1993B GENERAL
OBLIGATION BONDS
$34.5 MILLION DEBT AFFECTED
Ames (City of) IA
Municipality
Iowa
Issue
Rating
General obligation Refunding Bonds, Series 1993B Aaa
Sale Amount $3,205,000-00
Expected Sale Date 11/10/98
Rating Description General obligation Unlimited Tax
NEW YORK, November 9, 1998 -- Moody's Investors Service has assigned a Asa
rating, with a stable outlook, to the City of Ames General obligation
Refunding Bonds, Series 1998B. Assignment of this highest rating is due to the
city, s significant economic health and tax base growth, strong financial
management, considerable financial flexibility, and favorable debt position.
The presence of Iowa State University, the state's second largest higher
education institution, imparts considerable stability to the city's economy
and population. Additionally, varied light manufacturing and service
activities create some diversity and foster continued growth in city taxable
resources. Assessed valuation averaged healthy 5.4% annual increases from
Fiscal 1993 through 1999, due primarily to new growth. With 15% of city land
still available for development, and the construction of a 600,000 square foot
pasta manufacturing plant ongoing, Moody's expects satisfactory tax base
growth to continue over the next few years. Unemployment rates remain below
state and national averages, and the median housing value is 153% of the state
average. Income levels are favorable relative to Iowa averages, with median
family income measuring 115% of the state level.
The city's strong financial operations are demonstrated by increasing General
Fund balances, the use of a local option sales tax to enhance revenue
diversity, and the retention of a significant and increasing General Fund
operating property tax rate margin. General Fund balances - which
represented about 18% of General Fund revenues in Fiscal 1995 and 1996 -
grew to 34% in Fiscal 1998, and are expected to be maintained at that level in
Fiscal 1999. The large increase in balances was partly due to an unexpected
33% jump in sales tax revenues, from $3.4 million in Fiscal 1996 to $4.5
million in Fiscal 1997. This increase was attributable primarily to a one-time
change in the state's distribution of such funds. The city council recently
adopted a policy of retaining General Fund balances at a level of at least 15%
of General Fund revenues; while there are currently no plans to drive the
balance down to this level in the foreseeable future, officials will determine
on an annual basis what one-time projects to fund with any excess surpluses.
Property taxes represent the largest component of operating revenues, at 42%
in Fiscal 1998. Therefore, it is significant that the city is well below the
8.1 mill ceiling on the General Fund operating tax rate. The city rate was 31%
below the cap in Fiscal 1998 and will be 40% below it in Fiscal 1999. While
General Fund transfers to the Resource Recovery enterprise fund continue,
Moody's considers it positive that those levels are decreasing, from $108,000
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in'Fiscal 1996 to $71,000 in Fiscal 1998. Given the city's financial
attributes of ample General Fund reserves and significant operating tax rate
margin, Moody's believes the city's ability to maintain a sound financial
position for the foreseeable future is strong.
Continued growth in taxable resources and rapid bond payout have kept the debt
burden moderate. At 2.7%, the debt burden mirrors the national median for
similarly -sized cities. Amortization of principal, at 88.5% in 10 years, is
unusually fast. According to the 1999-2002 capital plan, the city will issue
approximately $4 million a year in general obligation debt for various
infrastructure projects. In addition, more than 30% of voters recently
approved a $1.7 million general obligation issue for construction of a
municipal ice arena. City officials anticipate issuing those bonds in the
beginning of 1999. No revenue bonds are planned for the next five years.
ANALYSTS:
Jina Yoon, Analyst, Public Finance Group, Moody's Investors Service
Gary Mescher, Senior Credit Officer, Public Finance Group, Moody's Investors
Service
Nicole Johnson, Director, Public Finance Group, Moody's Investors Service
CONTACTS:
Journalists: (212) 553-0376
Research Clients: (212) 553-1625