NEW YORK - Moody's Investors Service said it has upgraded Nogales Municipal Development Authority, Ariz.'s outstanding municipal facilities revenue bond rating to A1 from A2.
The upgrade affects $21.8 million in rated debt secured by rental payments, not subject to appropriation, payable from all city excise taxes, including city sales and transaction privilege taxes as well as the city's share of state sales and income taxes, all of which also support annual city operations. Concurrently, Moody's has upgrade the city of Nogales' street and highway user revenue bonds to Baa1 from Baa2. The upgrade affects $800,000 in rated debt secured by a first lien pledge on the highway user revenue received by the City.
The removal of the watchlist assignment follows Moody's receipt of the City's fiscal 2010 audited financial statements and collection of sufficient information to maintain the rating. City officials report that the delay in the fiscal 2010 audit was a onetime occurrence and anticipate the timely disclosure of the fiscal 2011 audit.
The upgrade for the municipal facilities bonds reflects the very strong maximum annual debt service coverage, the City's economic support from surrounding areas including border traffic, and additional security provided by a strong additional bonds test and a healthy cash funded debt service reserve fund. Despite strong debt service coverage calculations, the A1 rating also considers the negative trend in pledged revenues following the national recession and the expectation for pledged revenues to stabilize in the near term.
The upgrade for the street and highway user revenue bonds reflects the strong maximum annual debt service coverage, the City's economic lift from surrounding areas and international commerce related to the port of entry, and additional security provided by an average additional bonds test and a springing debt service reserve fund. The Baa1 rating also considers the recent negative trend in pledged revenues that is expected to stabilize with the expansion of the Mariposa Port of Entry.
