Fitch Affirms Taylorsville, UT's Sales Tax Revenue Bonds at 'AA'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- In the course of routine surveillance, Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. affirms its 'AA' rating on Taylorsville (the city), Utah's $8.9 million outstanding sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. revenue bonds, series 2006. The Rating Outlook is Stable. The 'AA' rating reflects still strong debt service coverage on the bonds despite recent sizable declines in pledged revenue, the city's solid underlying local economy with access to employment options throughout the greater Salt Lake metropolitan area, and the city's low debt burden and limited capital needs. Fitch notes as a credit concern the ongoing pressure on financial operations and fund balances in fiscal 2010 and 2011, given the decline in sales taxes in fiscal 2009, and the much lower-than projected year-to-date sales tax receipts in 2010. While the operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. for local tax-supported credits in Utah allows for more rapid cost-cutting to budgetary pressures than is typical, negative rating action could be warranted if the city is unable to maintain budgetary balance in fiscals 2010 and 2011 through effective cost cutting, or if sales tax revenue declines continue down their current path. The Stable Rating Outlook is based on the city's solid underlying local economy characterized by low unemployment levels and a relatively stable housing market, and the city's low debt burden and limited likelihood for additional parity bonds Parity Bond Two or more bond issues with equal rights to bond payments. Notes: Also referred to as "part passu" or "pari passu" bonds, these types of fixed-income securities are commonly issued by municipalities as a way to gather finance capital. . Security for the series 2006 bonds is a first lien on the city's sales and use revenues. Based on slowing retail activity, unaudited actual receipts for fiscal 2009 shows coverage will fall to 7.1 times (x) maximum annual debt service (MADS) from an estimated 9.5x in fiscal 2008. Even if pledged revenue declines 20% in fiscal 2010, which is the rate of decline in the first three months of the fiscal year, coverage will remain sound at 6.6x. Furthermore, debt service coverage levels remain robust under Fitch-developed stress tests. The city has no plans to leverage this revenue source further, although the additional bonds test Additional bonds test A test for ensuring that bond issuers can meet the debt service requirements of issuing any new additional bonds. additional bonds test in the indenture allows further issuance if revenues for the preceding fiscal year cover debt service on current and proposed bonds by at least 2.0x. The city's overall debt is a low 0.7% of market value. Capital needs are manageable and will be met with internal pay-as-you-go funding sources. The city's financial performance has remained solid during the current downturn. Fiscal 2009 unaudited total fund balance was estimated at $3.7 million (18.2% of total general fund outlay), while the unreserved balance has declined to 10% of general fund spending from 13% in fiscal 2005 thanks to targeted capital expenditures. The city budgeted a 3.1% decline in sales tax revenue from 2009 actuals in fiscal 2010, but year-to-date receipts indicate a much larger decline, so a drawdown Drawdown The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Notes: this year appears likely. However, management has indicated flexibility to cut general fund expenditures by up to 8% to reduce or eliminate any need to draw down on fund balance in fiscal year 2010 (FY10). Taylorsville is the 10th largest city in Utah with a population of approximately 59,000, located wholly within Salt Lake County. The city's tax base declined 9% in FY10. However, with a relatively stable local housing market that has been less affected by residential foreclosures than the national average, Taylorsville and Utah has suffered less from the housing crisis than the typical national community. The city's unemployment rate was a low 6.2% in August 2009 (versus the national rate of 9.6%). Management reports no major retailers downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing or exiting the jurisdiction. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP HTTP in full HyperText Transfer Protocol Standard application-level protocol used for exchanging files on the World Wide Web. HTTP runs on top of the TCP/IP protocol. ://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. |
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