Fitch Rates $15.6MM St. Charles Parish Law Enforcement Dist, LA Ltd Tax Bonds 'AA-'; Outlook Stable

2009-06-11 20:40:11 -

Fitch Ratings assigns its 'AA-' rating to St. Charles Parish Law Enforcement District, Louisiana's $7 million limited tax bonds, series 2009A, and $8.6 million limited tax bonds, series 2009B, scheduled to sell via negotiation the week of June 15, 2009.

The 2009A&B bonds are secured by a property tax levy, limited to 17.50 mills, on all taxable property within the district.

Levy proceeds in excess of debt service requirements are used for law enforcement operational needs. Proceeds of the 2009A bonds will finance the construction and equipment of a new law enforcement center. Proceeds of the 2009B bonds will refund outstanding debt. The Rating Outlook is Stable.

The rating is based on the district's strong financial performance, positive debt profile, and favorable wealth and employment trends, balanced against very high tax base concentration due to the predominance of energy, oil refining, and chemical production in the local economy. The St. Charles Parish Sheriff serves as the operating entity of the district; the parish sheriff has posted large and growing financial reserves and ample liquidity to meet its single purpose responsibilities. Such metrics are key due to the absence of remaining taxing margin although additional operational levies are available upon approval by district voters. Management's large fund balance goal, given the area's proximity to the hurricane-prone gulf coast, is considered a credit positive by Fitch. The district's favorable debt profile is characterized by low debt levels, notable use of pay-as-you-go capital outlays, and no future debt plans. Fitch considers the credit risk associated with the district's high tax base concentration to be offset by the strategic importance of oil refining assets to the regional and national economy. The maintenance of a solid financial cushion is key to credit quality given the absence of remaining taxing margin and the area's exposure to significant weather events.

The district is a political subdivision of the state and a parish-wide taxing district created for purpose of levying and collecting a property tax. The district levies the 17.50 mills to fund operations and debt service in addition to the 2005 voter-approved 3.72 mills to fund salary and benefit enhancements. In the event of assessed value (AV) fluctuations on existing property, the 17.50 millage rate can be adjusted so that the levy is consistent with the prior year. The district is coterminous with St. Charles Parish, located within the New Orleans metropolitan statistical area (MSA). The St. Charles Parish Sheriff, funded by the district, is the operating entity that provides all corrections and law enforcement services in the parish. The sheriff is the ex-officio tax collector and chief executive officer of the district. Hahnville, whose population is 2,700, is the parish seat.

The district's AV has posted a solid compound annual average growth rate of nearly 7% over the last five fiscal years. The future expiration of tax abatements on industrial properties is expected to provide continued tax base growth. The district's top 10 taxpayers comprise a very high 61% of AV led by Entergy Louisiana (Fitch Issuer Default Rating of 'BBB-' with a Stable Outlook) at 18.9% of AV; Entergy owns and operates the Waterford Nuclear Power Plant within the parish. Four oil refineries among the top 10 taxpayers account for a high 23.6% of AV. Unemployment levels have risen only modestly to 4.7% in April 2009, benefiting from the large-scale reconstruction efforts throughout the New Orleans MSA.
Parish wealth levels are above average with 2007 median household income equal to 145% and 116% of state and national averages, respectively.

The parish sheriff has exhibited a positive trend of growing financial reserves with general fund surpluses posted in four out of the last five fiscal years. Management has established an informal fund balance goal of maintaining a large general fund balance of at least 40% of spending which allows the parish to avoid utilization of any cash flow note borrowing. For fiscal 2008, the parish sheriff posted an unreserved fund balance of $13.4 million, equal to a high 42% of spending. Projected fiscal year (FY) 2009 results point to a $1.5 million drawdown due to $3.2 million in pay-as-you-go capital outlays for new radio equipment.
The fiscal 2010 budget projects a modest $643,000 drawdown due to additional capital outlays totaling $1.8 million.

Proceeds from the 2009A bonds will be used to build office space for parish sheriff employees currently housed in leased space. The 2009B bonds will refund a loan agreement with Louisiana Local Community Development Authority which financed the construction of a 600-bed jail.
The final maturity of the loan agreement will be extended by 10 years to 2029 at a net present value cost of $125,000 or 1.5% of the refunded bonds. Such restructuring will create capacity for the new money without increasing annual debt service costs. The parish sheriff's overall debt levels are modest at $2,711 per capita and only 1.4% of full value. No additional debt plans are contemplated at this time.

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Fitch Ratings, AustinJose Acosta, 512-215-3726Steve Murray,
512-215-3729Cindy Stoller, 212-908-0526(Media Relations, New
York) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com