NEW YORK - Standard & Poor's Ratings Services said it raised its underlying rating (SPUR) on Harris County Municipal Utility District (MUD) No. 276, Texas' general obligation (GO) debt one notch to BBB-plus from BBB based on the district's improved financial position. The outlook is stable.
At the same time, the rating service assigned its BBB-plus SPUR, with a stable outlook, to the district's series 2004A and 2005 GO bonds.
The rating reflects Standard & Poor's assessment of the district's access to Houston's deep and diverse economy; mature development, limiting any significant additional capital needs; and strategic partnership agreement with Houston that provides the district with a financial benefit from the nonresidential component of its property tax base.
These factors are offset, in part, by the district's high overall net debt burden.
"We believe the MUD will sustain its financial position through strong service fee and property tax collections," said Standard & Poor's credit analyst Omar Tabani. "It is also our opinion that the MUD will only issue additional debt as long as the debt can be supported by property tax base growth so as to not increase its already high debt burden significantly."
The district's financial position is strong. The district has added to its reserves in each of the past five fiscal years. At fiscal year-end 2009, the unreserved general fund balance totaled approximately $1.2 million, or, in Standard & Poor's opinion, a strong 96.0% of operating expenditures, an increase from a low 15.6% at fiscal year-end 2006.
In addition, fiscal 2009 ended with a $1.4 million debt service fund balance, or a strong 93% of the maximum annual debt service requirement scheduled to occur in 2011. While the district is not legally required to maintain a debt service reserve, it, in general, uses such funds to make debt service payments. The district's direct property tax rate is a low 79 cents per $100 of assessed value.
Assessed valuation grew by 29% annually since fiscal 2006 to $244.8 million in fiscal 2009. The district, however, has experienced a 2% assessed value decline to $240.7 million for fiscal 2010.
The overall net debt burden remains a high 13% of fiscal 2010 assessed value. Amortization is average with officials planning to retire 58% of principal over 10 years and 100% by 2027.
The rating action affects roughly $15.3 million of debt outstanding.
