Fitch Rates Kalamazoo, Michigan's 2007 Tax Anticipation Notes 'F1+'.CHICAGO -- Fitch assigns an 'F1+' short-term rating to the City of Kalamazoo, Michigan's $6,000,000 tax anticipation notes Tax Anticipation Notes (Tans) Notes issued by states or municipalities to finance current operations in anticipation of future tax receipts. (TANs), series 2007. The notes are scheduled for competitive sale on Jan. 16, 2007 with Robert W. Baird Robert Wilson Baird (born April 1, 1883) helped found the financial services firm that bears his name and led it for more than 40 years. Baird’s father was a professor of Greek literature at Northwestern University in Evanston, Illinois, where Baird grew up. & Co. serving as financial advisor on the transaction. The TANs constitute a limited tax, general obligation (GO) of the City of Kalamazoo. Proceeds are issued in anticipation of operating taxes for the 2007 fiscal year. Also, Fitch affirms the 'AA' rating on the City of Kalamazoo's approximately $61 million of outstanding limited tax GO debt. The Rating Outlook is Negative. The 'F1+' short term rating on the TANs, Fitch's highest rating, reflects ample projected note coverage from available revenues as of November 2007 of 1.9 times (x) and adequate set aside provisions as transfers to the note repayment fund begin in July 2007, while the notes mature Dec. 1, 2007. The long-term Negative Outlook reflects financial strain brought on by reduced state revenue sharing revenue sharing Funding arrangement in which one government unit grants a portion of its tax income to another government unit. For example, provinces or states may share revenue with local governments, or national governments may share revenue with provinces or states. amid rising operating costs operating costs npl → gastos mpl operacionales . Management took steps to restrain spending through reducing staffing levels. However, these measures did not counterbalance the 18% loss in intergovernmental revenue between fiscal years 2002 and 2004 (Dec. 31 year-end). Although two years of general fund shortfalls reduced the city's ending balance to $2.2 million (4.4% of spending) in 2004, compared to $6.2 million (13%) in 2002, the city experienced renewed revenue growth in 2005 and years of cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. efforts bore fruit as the general fund produced a surplus. A continuation of this positive financial trend would likely result in reconsideration of the Negative Outlook. The city remains vulnerable to state revenue sharing declines but is implementing a variety of reserve funds to enhance its long-term fiscal position. Additionally, Kalamazoo typically allocates a large portion of its operating reserves In power systems, the operating reserve is the generating capacity available to the system operator within a short interval of time to meet demand in case a generator is lost or there is another disruption to the supply. to capital projects, providing a significant degree of financial flexibility. Maintenance of the 'AA' rating reflects the city's balanced economic foundation, moderately growing tax base, manageable debt burden, and conservative fiscal management. While Kalamazoo remains somewhat dependent on the pharmaceutical industry, the large presence of its universities and its highly educated workforce help reduce economic volatility related to manufacturing. Kalamazoo's steady tax base growth, averaging 3.4% annually since 1999 and underpinned by management's sound financial policies and conservative budgeting, allowed the city to build adequate financial reserves. However, several years of reduced state-shared revenue, coupled with spending needs driven by public safety, sapped general fund reserves, decreasing the fiscal 2004 general fund balance to $2.2 million (4.4% of spending). The city reacted to these declines by constraining con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. spending through staff reductions and limited service cuts. Fiscal 2005 audited results produced over $2 million in spending reductions relative to 2004. Coupled with renewed revenue growth through gains in tax receipts and limited state aid increases, the city's fiscal 2005 general fund produced a surplus of $1.2 million, increasing the total balance to $3.4 million or 7% of spending. Financial flexibility is further enhanced by the city's annual practice of transferring substantial amounts to provide pay-as-you-go funding for capital projects. In fiscal 2005, the general fund transferred $3.2 million to meet capital needs, primarily for streets improvements. Fiscal 2006 results are expected to be stable. Further, the city recently adopted several financial policies aimed at shoring up Noun 1. shoring up - the act of propping up with shores propping up, shoring supporting, support - the act of bearing the weight of or strengthening; "he leaned against the wall for support" reserve levels. The city's direct debt equals $875 per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals. or 1.8% of market value, with overall debt at a moderate $2,096 per capita, or 4.2%. Debt levels should remain moderate as the capital plan anticipates the use of internal sources for the bulk of its financing needs. The city may pursue a small GO offering for street improvements in the next year. Fitch's 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 site, 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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