DALLAS — The City and County of Denver is aiming to take advantage of low interest rates and its top credit rating with the competitive sale of $45 million of general obligation bonds and a $40 million refunding of certificates of participation.
The GO sale of Series D Better Denver Bonds is scheduled for next week, and the refunding of the COPs the following week.
Despite continuing pressure from the economy, Denver retains triple-A ratings on its GO debt across the board. Standard & Poor’s and Fitch Ratings each confer a AA-plus on the COPs. Moody’s Investors Service gives it a comparable Aa1.
“The rating assignments incorporate the city’s strong credit characteristics,” said Moody’s analyst Patrick Ford. These include “Denver’s regional economic importance, well-managed financial operations despite recent declines in major revenue streams, and increasing but manageable debt levels.”
Though the city’s median home price has fallen, Denver’s real estate market has been less volatile than those of some Western cities, particularly hard-hit Phoenix and Las Vegas.
The S&P/Case-Shiller Home Price Index in June 2010 showed that single-family home prices in the Denver metro area rose 1.8% from a year earlier. Denver monthly housing prices posted modest increases during the four-month period ending in June, according to the index.
City property taxes made up 8.3% of 2009 general fund revenues.
“In our opinion, the city’s financial performance is largely dependent on sales taxes, which accounted for about 52% of general fund revenues in both 2007 and 2008,” wrote Standard & Poor’s analyst Matthew Reining.
“In 2008, final collections increased 3.1% — down from the city’s revised budget projection of 5.2% growth — despite a decline in sales taxes in the later months due primarily to the national economic slowdown.”
Analysts also noted the city’s efforts to cut costs in line with revenues.
“Additional large budget cuts have been imposed in the current year budget to achieve structural balance,” wrote Fitch analyst Jose Acosta. “Management is projecting level reserves in its proposed 2011 budget, aided by additional cuts, revenue enhancements, and one-time revenue sources.”