In the course of routine surveillance, Fitch affirms the 'A+' rating on the city and county of Broomfield, Colorado's (the city and county's) $105 million outstanding sales and use tax revenue bonds. The Rating Outlook is Stable.
The 'A+' rating reflects strong debt service coverage ratios which have been fueled by the city and county's population and retail growth. Credit concerns include the economically sensitive nature of the sales taxes and Broomfield's very high debt levels.
Broomfield's population has grown approximately 2.5% annually since 2003 led by a strong information sector. The sales and use tax revenues have experienced similar growth, however, it is concentrated in retail at the Flatiron Mall. The gains have averaged approximately 7% annually from 2003-2007, but have slowed to 1.2% year-to-date for 2008. City officials attribute the recent slowing to competing regional malls, planned vacancies for redevelopment, and the local economy.
The bonds are secured by a first lien on one-third of the city and county's 3.5% sales and use tax, plus additional available sales and use tax revenues net of administrative costs and tax rebates. Current coverage by the first lien on the one-third sales and use tax is equal to a strong 2.4 times (x) maximum annual debt service (MADS), which provides some cushion in the event of a decline in revenue. The city and county maintain strong unreserved fund balances equal to approximately 30% of expenditures and transfers out.
The city and county's debt ratios are very high at $11,802 per capita or 8.5% of market value including overlapping debt. These well above average levels result from the infrastructure requirements needed when the former City of Broomfield reformed into a merged city and county entity in 2001. Previously, the city was part of four counties and infrastructure planning and provision was not sufficient or uniform.
Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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