DALLAS — Plans to issue $39.5 million of bonds for a 6,500-seat performing arts center in the Houston suburb of Sugar Land will cost the city's conduit issuer a notch on its credit, according to Moody's Investors Service.
Moody's lowered the Sugar Land Development Corp. to A1 from Aa3 on Oct. 23, citing "a significantly weakened debt service coverage position, as well as high leverage as the corporation triples its debt."
The bonds will partially finance a new performing arts center, plaza, and parking facilities. The project's total cost is estimated at $87.1 million, with completion expected in 2016.
Standard & Poor's affirmed its A-plus rating and stable outlook on the upcoming bonds and previously issued debt.
The arts center and an associated tax increment reinvestment zone represent 60% of Sugar Land's capital improvement plan for fiscal year 2015.
The project is funded by the combination of an economic development sales tax, hotel occupancy taxes, rental payments for the facility and ACE SL, the city's public-private partner.
The Sugar Land Development Corp. approved a design agreement with Martinez & Johnson Architects on Sept. 3 for the final design of the venue. ACE SL will contribute $10 million in financing for the project, officials said.
Voters approved funding for the project in 2008.
With a population of more than 80,000, upscale Sugar Land has enjoyed a boom from energy-related business since the 2008 recession.
Sales tax collections peaked at $4.9 million in fiscal year 2009 before declining by 4.6% in the following year, Moody's analyst Ray Ousley noted in his Oct. 23 report. Since then, collections have exhibited strong recovery, growing a strong 4% in 2011, and then 10.2% in 2012.
"Given the corporation's history, and overall stable economic climate, we believe that the debt service coverage will remain satisfactory through the life of the bonds," Ousley said.
