AUSTIN, TEXAS $27.9 MILLION TAX-BACKED BONDS RATED
AUSTIN, TEXAS $27.9 MILLION TAX-BACKED BONDS RATED AA' BY FITCH
-- FITCH FINANCIAL WIRE --
NEW YORK, Nov. 13 /PRNewswire/ -- Austin, Texas's $25 million Public Improvement Bonds, Series 1991-A and $2.9 million Public Property Finance Contractual Obligations, Series 1991-B are rated "AA" by Fitch. The bonds are being sold competitively on Nov. 14. The credit trend is stable.
Austin's credit strength lies in the economic importance of the state capital and the University of Texas, and the stability they provide, as well as recent evidence of economic recovery. The city's financial operations have been strong despite a period of economic weakness. Future growth is likely to continue, but at a slow pace. The city's debt levels are high currently and will likely remain so, as future issuance offsets debt retirement.
Austin's economy continues to recover from a severe downturn in the mid-to-late 1980s. Beginning in 1988, employment gains returned, led by manufacturing, services, and government. Unemployment declined to 4.8 percent in 1990, dropping below the national level for the first time since 1986. Real growth occurred in some sectors of the tax base, though the gains have been more than offset by losses in other areas. Retail trade activity has improved significantly as well, with 1991 marking a fourth consecutive year of positive growth, following two years of declines. Office vacancy rates in downtown Austin have fallen to 19 percent from a 34 percent peak, and are now only slightly ahead of the 17 percent national average. Home sales activity increased 14 percent in 1990, with another increase expected in 1991. Prices appear to be increasing as well, but remain 18 percent below the 1986 high. The recently announced closing of Bergstrom Air Force Base is likely to have a dampening effect on the recovery.
The city's financial operations continue to be strong despite declines in the property tax base. Sales tax performance has been good, benefiting from a statewide expansion of the base and the return of strong trade activity. The city ended fiscal 1990 with a $31.8 million general fund balance, equal to 14.5 percent of operating expenditures. Unaudited results for fiscal 1991 indicate a drawdown to $25.6 million, still a sound 11.5 percent of expenditures.
Austin's overall debt levels are high, with debt service expense representing nearly 20 percent of the operating budget. Overall debt on a per capita basis is $2,049 and is 5.6 percent of property value. Property tax-supported future issuance will be held to $25 million annually, as has been the practice historically. Additional debt, however, will not significantly alter the ratios as current maturities will largely offset the future issuance.
/CONTACT: Amy S. Doppelt, 212-908-0514, or Richard J. Raphael, 212-908-0506., both of Fitch/ CO: City of Austin ST: Texas IN: SU: RTG SH -- NY074 -- 4040 11/13/91 14:39 EST