Published: February 01, 2011
Fitch Downgrades Glenwood Springs Rural Fire Protection Dist, CO's LTGOs to 'BBB'; Outlook Negative
AUSTIN, Texas - (BUSINESS WIRE) - Fitch Ratings has downgraded the following Glenwood Springs Rural Fire
Protection District, Colorado (the district) bonds as part of its
routine surveillance:
--$745,000 limited tax general obligation (LTGO) bonds to 'BBB' from
'AA-'.
The Rating Outlook is Negative.
RATING RATIONALE:
--The downgrade to 'BBB' from 'AA-' reflects the district's dramatically
deteriorated financial flexibility driven by unanticipated expenditure
increases and structural imbalances, resulting in nearly-depleted
reserves.
--The Negative Outlook reflects Fitch's expectation that financial
operations will remain strained given the likelihood of continued
structural imbalances due to projections of sizeable taxable value
declines.
--Operating expenditures have outpaced revenue for eight years in a row
including fiscal 2010, when operating revenue increased 33%.
--The district has very limited flexibility to raise general operating
revenues.
--Offsetting some concerns are the district's limited purpose, ability
to raise the debt service millage, and very low overall debt burden with
no plans for additional issuance.
WHAT COULD TRIGGER A DOWNGRADE?
--The district's inability to adjust operating expenditures to match
available revenue;
--Further depletion of fund balance.
SECURITY:
The bonds are secured by pledged revenues from the LTGO mill levy on all
taxable property within the district at a rate not to exceed 3.126 mills.
CREDIT SUMMARY:
The downgrade reflects the district's deteriorating financial
flexibility driven by unanticipated expenditure increases and the
adherence to statutory revenue growth limitations which were waived by
voters over a decade earlier. By fiscal year-end 2009, the unreserved
general fund balance had declined drastically to a negligible $26,000 or
just 5% of total spending, from $304,000, or 67% of spending in fiscal
2004. Fiscal 2009 reflected the eighth consecutive annual operating
deficit, with another drawdown anticipated for 2010 and budget
stabilization a challenge for the future. The Negative Outlook reflects
Fitch's expectation that financial operations are likely to remain
strained given the governing board's inaction in addressing its trend of
diminished financial reserves.
Declining reserves result from both rising fire protection costs and
constrained revenue growth. The former resulted when the city's fire
department was required to hire additional staff in order to address
concerns raised by their insurance company. Revenue constraints derived
from the district's belief that a 1994 voter approved waiver of Tax
Payer Bill of Rights (TABOR) statutory growth limit did not apply to the
district's property tax revenues. As a result, the district continued to
rebate property tax revenues in excess of the TABOR limit back to
taxpayers. However, in 2010, the district decided to cease the rebates
based on an independent legal opinion that the 1994 waiver applied to
the district. The district and the city also adopted a revised
intergovernmental agreement for 2011 that lowered costs for fire
protection in the near term by shifting costs to the city, but this
agreement must be renewed annually.
Despite the relief in revenue, results for fiscal 2010 are estimated to
be negative, further reducing the unreserved fund balance to 2% of
spending. Even without the TABOR limitation, revenues are likely to be
constrained given projections of sizeable assessed value declines
impacting the fiscal 2012 budget. The general operating millage has been
set at its cap of 6.339 mills for the past two fiscal years; increasing
the rate would require voter approval.
The district spans 67 square miles in unincorporated Garfield County in
northwestern Colorado, approximately 160 miles west of Denver. The
district's population is estimated at 9,100 as of 2009. It is an
independent taxing entity with limited functions, and operates under an
intergovernmental agreement with the city of Glenwood Springs (the city)
since 1991, whereby the city provides fire protection and ambulance
service in return for a proportional share of the district's property
tax revenues.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates,
LoanPerformance, Inc., and IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Oct. 16, 2010);
--'U.S. Local Government Tax-Supported Rating Criteria' (Oct. 8, 2010).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
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DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE 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 ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE.
Fitch, Inc.
111 Congress Ave., Suite 2010
Austin, TX 78701
Primary
Analyst
Matt Dustin, +1-512-215-3727
Analyst
or
Secondary
Analyst
Jose Acosta, +1-512-215-3726
Senior Director
or
Committee
Chairperson
Amy Laskey, +1-212-908-0568
or
Media Relations
Cindy
Stoller, +1 212-908-0526
cindy.stoller@fitchratings.com
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