2008-05-09 22:37:09 -
- Fitch Ratings assigns an 'AAA' rating to the City of Charlotte, North Carolina's approximately $183.9 million general obligation (GO) refunding bonds, series 2008. The bonds are expected to sell via negotiation on May 13. Bond proceeds will be used to refund the city's series 1998 and series 1999 GO bonds for a projected cash flow savings of $17 million.
The city plans to deposit the savings into its OPEB Trust Fund. Fitch also affirms the 'AAA' rating on the city's $810 million (net of refunding) outstanding GO bonds. The Rating Outlook is Stable.
The 'AAA' GO rating reflects Charlotte's broad, diverse economic base and prominence as a major banking and commercial center, above-average wealth levels, sound tax base growth, excellent financial position with policies that ensure ample operating flexibility, and moderate direct debt levels. Overall debt levels have increased recently and are likely to increase further given the capital needs of the city and Mecklenburg County, especially for Charlotte-Mecklenburg Schools, but should remain affordable.
Located in the Piedmont region of North Carolina, Charlotte is the largest city in the state and includes 75% of Mecklenburg County's population. The city's population grew by a strong 36.7% during the 1990s and an estimated 16.6% since the 2000 census. In addition to in-migration, periodic annexations contribute to population and tax base growth. Per capita personal income levels in the county are well above state (by 37%) and national (by 21%) averages. The city's unemployment rate has been below state and national averages since 2005 and was 4.8% in February 2008 relative to 5.4% for the state and 4.8% for the nation. The headquarters of Bank of America Corp. and Wachovia Corp., two of the nation's largest banks, are located here, and the city is the second largest banking center in the U.S., based on headquartered assets. Major employers and taxpayers continue to invest in the area, as indicated by solid building permit activity and good assessed valuation (AV) growth. Countywide retail sales are above state and national averages.
Charlotte's financial position and management are very strong. Management has instituted policies to maintain solid reserves and requires that the undesignated general fund balance equal at least 16% of the following year's budget, twice the state-recommended level of 8%. Fiscal year 2007 was the fifth consecutive year of general fund positive operations. The $13.8 million surplus bolstered the total general fund balance to $146.7 million at the close of fiscal year 2007. The unreserved portion of the fund balance, when added to the reserve required by state statute, equals 27.7% of expenditures, transfers out, and other uses. In addition, the debt service fund's unreserved balance for fiscal 2007 of $137.0 million, or 26% of combined general and debt service fund expenditures and other uses, provides a significant cushion. City officials report that year-to-date general fund performance is consistent with the budget and expect to post an operating surplus.
Fitch expects current above-average overall debt levels to increase in the next few years as the county continues an ambitious capital program, particularly for its school system. The city's direct debt levels are moderate but are growing as a result of investments in civic, cultural, and transportation assets. The proposed five-year capital improvement plan (CIP) through 2012 is a sizable $3.2 billion, most of which is for regional transit, aviation, and utilities.
Fitch's rating definitions and the terms of use 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 are also available from the 'Code of Conduct' section of this site.
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