DALLAS — Fitch Ratings has downgraded $12.6 million of certificates of participation issued in 2009 for Tucson’s downtown Rio Nuevo Multipurpose Facilities District while affirming the city’s general obligation debt at AA-minus.
The COPs, issued in the name of the Rio Nuevo district, fell to A-plus from AA-minus. Its outlook was changed to stable from negative.
Rio Nuevo was formed in 1999 by the cities of Tucson and South Tucson to redevelop downtown. The 658-acre district includes the second- and third-largest shopping malls in the city, along with residential and commercial property.
The COPs are secured by city lease payments for the Tucson Convention Center.
Tucson, Arizona’s second-largest city behind Phoenix, has suffered a drop in convention and tourism business since the 2008 financial meltdown. As the industry began to recover in 2010, the state was hit by an international tourism and convention boycott based on its enactment of SB 1070, which required police to detain anyone suspected of being in the country without proper documentation.
According to a new study from the Arizona Office of Tourism, travel-related spending in southern Arizona peaked in 2006 at more than $2.2 billion in direct spending, falling to $1.9 billion in 2009. Last year saw a slight increase.
Faced with falling revenues, Tucson has eliminated more than 900 positions since fiscal 2009, frozen salaries, adjusted benefits, launched citywide department spending cuts, and taken other measures. The fiscal 2011 budget cut base salaries 3.5%, delayed capital projects, and made other spending reductions.
Local and state shared sales tax revenues are expected to exceed budget forecasts by 4%. With a 2010 census population of 520,116, Tucson has seen growth slow from its 2001 peak. Housing permits have fallen from 3,800 then to only 390 last year.
The Tucson housing market did not suffer as much as that of the Phoenix area due to less price inflation during the credit-bubble phase. The most recent residential delinquency and foreclosure rates in Tucson are below the national averages.
The city’s economy is anchored by services, military, and government. The military presence in the area includes the U.S. Army Intelligence Center and Fort Huachuca, and Davis-Monthan Air Force Base.
Public-sector employment is led by state and local government agencies and public and higher education, including the University of Arizona’s main campus, which employs nearly 12,000.