DALLAS - Fitch Ratings cited New Orleans' gradually improving economy in raising the rating on the city's tax-secured general obligation bonds to BBB from BBB-minus yesterday. The move applies to $523.9 million in outstanding GO debt.
Noting that New Orleans still faces years of recovery from the flooding resulting from Hurricane Katrina in August 2005, the report from analysts Steve Murray and Laura Porter said the rebuilding effort "is providing a measurable boost to economic activity during the current recession and will establish a solid foundation for future economic growth."
Murray said the upgrade reflects the continuing stimulus from recovery efforts, which has resulted in increased property values, higher tax collections, and overall improvements in the local economy.
The upgrade came from Fitch's periodic surveillance effort, Murray said, and not as a result of a pending bond issue.
"We have a schedule where we look at governments that haven't had any new-money issues coming into the market for some time," he said. "When we looked at New Orleans, we saw an improving fiscal picture.
"The city is still facing a lot of challenges but it is making progress," Murray continued. "The amount of recovery dollars being funneled into New Orleans is substantial, and it will continue at least for the next couple of years."
The city's GO debt is rated Baa3 by Moody's Investors Service and BB by Standard & Poor's.
Murray said most of the preliminary phases of several extensive recovery projects in New Orleans have been completed, with major work set to begin soon.
"The city tells us the federal funding is just now beginning to ramp up," he said. "Work over the next couple of years will require some of the largest expenditures so far."
Total property tax valuations rose 10% in 2007 and nearly 38% in 2008 as a result of citywide reappraisals. Property tax collections in 2008 totaled more than 85% of the levy amount, which is close to the city's historical average.
Sales tax revenues are also increasing steadily, rising by an annual average of 7% between 2006 and 2008.
Residents continue to return to New Orleans as housing becomes available and infrastructure is repaired. The U.S. Census Bureau recently revised its June 2007 estimated population to some 288,000, up almost 20% from the original numbers. Current estimates put the population at between 300,000 and 325,000, or almost 70% of pre-hurricane levels.
The federal Road Home Program, largest of several federal and state housing assistance efforts for the Gulf Coast, has accelerated its program over the past 12 months to bring total closings to 124,000, or nearly 90% of the total number of applications. The program has disbursed $7.9 billion for residential rebuilding efforts in Louisiana.
Tourists are also returning to New Orleans, at least for major events. Some one million visitors came to New Orleans for this year's Mardi Gras festivities.
Hotel rooms in the area are estimated at 85% of the 38,000 rooms that were available before the 2005 storm. However, convention bookings are sluggish over the past six months. As a result, hotel bookings were down in the last three months of 2008 compared to 2007 occupancy.