The city has been rated and is financially solid:
NEW YORK–(BUSINESS WIRE)–Fitch Ratings takes the following rating action on Tamarac, FL as part of its continuous surveillance effort:
–$1.6 million general obligation (GO) bonds affirmed at ‘AA’;
–$14.2 million capital improvement bonds affirmed at ‘AA-‘;
–$5.06 million sales tax revenue bonds affirmed at ‘AA-‘.
The Rating Outlook is Stable.
RATING RATIONALE:
–Tamarac’s ‘AA’ GO rating reflects the city’s solid financial management, with surplus results recorded in the general fund for the past five consecutive audited fiscal periods, and healthy unreserved fund balances projected to remain above 30% of spending at the close of fiscal 2011.
–The city’s economy is limited, and wealth levels are below average, which is reflected in an unemployment rate that continues to exceed the state and national averages.
–The city’s overall debt burden is manageable and is expected to remain so given no planned debt issuances for the foreseeable future, although unfunded pension liabilities may result in other long term fixed cost pressures.
–The ‘AA-‘ rating on the capital improvement revenue bonds reflects the general credit characteristics of the city as well as strong debt service coverage provided by the city’s covenant to budget and appropriate (CB&A) a diverse mix of non ad-valorem revenues sources. Legal provisions for the bonds are standard.
–The ‘AA-‘ rating on the city’s sales tax revenue bonds reflects the pledge of the sales tax revenues, and the secondary pledge of a covenant to budget and appropriate (CB&A) non ad-valorem revenues in an amount sufficient to satisfy debt service. Given the double-barrel pledge, if at any point in the future the creditworthiness of either security diverges, the rating on the bonds should always reflect the higher of the two securities.
KEY RATING DRIVERS:
–Ability to maintain adequate financial flexibility given potential future volatility in the tax base and economically sensitive revenues.
–Performance of pledged revenues for sales tax and capital improvement bonds.
SECURITY:
The GO bonds are general obligations of the city for the payment of which the city’s full faith and credit and unlimited taxing power are irrevocably pledged.
The capital improvement revenue bonds are secured by the city’s covenant to budget and appropriate available non-ad valorem revenues in its annual budget. Such covenant is cumulative and shall continue until all payments of principal and interest on the bonds shall have been budgeted, appropriated, and actually paid.
The sales tax revenue bonds are secured by the half-cent local option sales tax with a secondary pledge to covenant to budget and appropriate non ad-valorem revenues to pay debt service.
CREDIT SUMMARY:
Tamarac is located in northwest Broward County (GO bonds rated ‘AAA’ by Fitch). Created in 1963 primarily as a residential retirement community, the city’s demographics continue to shift to a younger population. The median age has decreased from 65 in 1990 to its current level of 47.6. While the city remains primarily residential, recent economic developments have begun to diversify the tax base with several of the city’s largest employers located in the 500 acre Tamarac Commerce Park. Some of the city’s largest employers include: Convergys Customer Management CP (950 employees), City Furniture (840 employees) and Publix Supermarkets (443 employees). Unemployment is high and increased to 12.1% in December 2010 from 11.3% a year prior, exceeding the state and national levels.
Reserve levels have remained sound, despite sizeable tax base retraction and overall revenue weakening. Since the peak in fiscal 2008, the city has experienced assessed value decreases over the past three years with a total loss of 43% of taxable value. Despite increasing the millage rate to 5.999 from 5.315 for fiscal 2010, the tax levy still declined due to the deterioration in property values. With other major revenue streams also weakened, the city aggressively reduced expenditures to maintain fiscal stability and strong reserve levels. Some of the cuts included: eliminating all temporary staff and several full-time positions, and offering a voluntary separation program. As a result, the city ended fiscal Sept. 30, 2010 with a $1.84 million operating surplus, increasing the total general fund balance for the fourth consecutive year to $24.59 million or a substantial 59% of general fund expenditures and transfers and an unreserved fund balance of $14.23 million or 34%.
The 2011 General Fund adopted budget totals $44.7 million, which is nearly $3 million less than the 2010 amended budget. The budget incorporates a millage rate increase for the third consecutive year to a moderate 6.5 mils from 5.99, but less than the revenue neutral rate of 7.503. Due to continued taxable assessed value declines, property tax revenues are expected to decrease again for fiscal 2011 by $2.35 million. To offset the decline, the City Commission adopted the Electric Public Service Tax at the maximum rate of 10%, which is expected to generate approximately $3.1 million during fiscal 2011. The budget also includes $635,302 of appropriated fund balance, which management expects to fully replenish during the current fiscal year (FY 2011).
Sales tax revenues have softened, moderately in the past few years, including a 0.63% decline ($28,700) in fiscal 2010; however year-to-date performance for FY 11 suggests that sales tax collections are stabilizing and coverage is expected to continue to provide ample bondholder protection. Relative to last year, revenues are up 5% year-to-date. Coverage remains adequate at 1.75 times (x) maximum annual debt service (MADS) based on fiscal 2010 revenues. Legal provisions are average including a 1.25x additional bonds test. Pledged non ad valorem revenues in fiscal 2010 accounted for a sizable 56% of total general fund revenues and transfers in. Coverage remains strong at 5.6x MADs and is expected to remain ample given the city’s reliance on residual revenue to fund general government operations.
Overall debt ratios remain above average at 3.9% of taxable assessed value and $1,988 per capita reflecting a large amount of overlapping debt from the Broward County school district. Direct debt levels are low. The city’s five-year (2011-2016) capital improvement plan totals $45.8 million with General Fund projects accounting for just $2.695 million. The city plans to fund its capital plan through pay-as-you go funding and user charges.
Combined pension contributions to the city’s four separate single-employer defined benefit plans were $6.99 million in 2010, equivalent to a high 17% of general fund spending and 116% of the annual required contribution amount to improve the plans’ funded positions. On a combined basis, the city’s defined benefit pension plans have a funded ratio of 64% (adjusted by Fitch to a 7% investment rate of return for the police pension fund). The city funds its OPEB obligation on a pay-as-you-go basis contributing $37,687 or 27% of the ARC in fiscal 2010. The city’s fiscal 2010 year-end liability was modest representing less than 1% of spending.
Additional information is available at ‘www.fitchratings.com‘.