Fitch Ratings downgraded the Maricopa County Stadium District two notches to BBB-minus from BBB-plus due to falling revenues pledged for outstanding bonds, analysts said last week. The outlook is negative.

The action reflects "ongoing weakness in car rental tax collections, which have reduced current collections to less than 1.0 times annual debt service on the district's outstanding revenue bonds," analyst Steve Murray wrote.

Although sales tax and car rental tax revenues have shown modest improvement in recent months, near-term prospects for the Phoenix-area economy remain uncertain, raising the possibility of further declines in pledged car rental tax revenues, Murray noted.

Pledged car-rental tax revenue had declined over the past two years due to the severe recession that collapsed the housing market and shrank recreational travel to the Phoenix metropolitan area.

After registering nearly 7.5% average annual gains in the fiscal 2004 to 2006 period, revenue declined around 3% in fiscal 2007 and 2008, then experienced more dramatic drops of 12% or more in both fiscal 2009 and 2010, according to Fitch.

"This trend has reduced annual revenues from a peak of nearly $6.5 million in fiscal 2006 to $4.7 million in fiscal 2010," Murray noted. "At this level, annual revenues (including investment earnings) fall short of the annual debt-service requirement of $5.4 million, reaching just 0.86x coverage for fiscal 2010. The negative coverage margin is a major credit concern."

The district can issue bonds or other obligations to acquire land, finance new facilities or promote existing facilities for Major League Baseball's spring training facilities in the Cactus League. As of June, 2010, it had $38.9 million in outstanding revenue bonds.

Standard & Poor's and Moody's Investors Service do not rate the district.

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