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Home My WebLink AboutIR 9884 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9884 To the Mayor and Members of the City Council May 17, 2016 h%Tti7 pG �r�4 Si { �i7 Y *a SUBJECT: RATING AGENCY RESULTS ASSOCIATED WITH THE 2016 DEBT rrn PLAN Background As part of the City's 2016 debt plan and the upcoming bond offerings, the City completed rating agency presentations to Moody's, Fitch and Standard and Poor's the week of April 25th. The following presents the ratings assigned to the City's General Purpose Refunding and Improvement Bonds, the Water and Sewer Revenue Improvement and Refunding Bonds, and the Drainage Utility System Revenue Refunding Bonds. General Purpose Refunding and Improvement Bonds, Series 2016 Rating Moody's- Aa2 with a Stable Outlook, downgraded from a Aa1 Fitch: AA+ with a Stable Outlook Standard and Poor's- AA+ with a Stable Outlook Credit Opinions - Highlights of Rating Agency Comments Moody's noted that the "Aa2" rating and downgrade reflects the City's large and growing unfunded pension liability and growing fixed cost burden, which includes annual pension, OPEB and debt service requirements. The rating and outlook also reflects positive attributes, including the City's large and diverse tax base that is expected to remain on a growth trend, average socioeconomic indices considering the large metro area, and stable financial performance with adequate reserves. Fitch noted the "AA+" rating reflects Fitch's expectation of the City's strong operating performance throughout the economic cycle, as well as the City's moderate long-term liability burden. They note that the City has solid economic and revenue prospects and significant control over revenues and spending, and has recently demonstrated strong budget management that Fitch expects to continue. Fitch also noted that the recent results indicate significant progress on reporting and financial control matters, and that the City's revenue performance has been healthy since the recession. Standard & Poor's noted their assessment of AA+ is attributed to a series of factors including: • strong management with strong financial policies and practices • strong budgetary performance and flexibility • very strong liquidity and 10.8X governmental debt service • weak debt and contingent liability position, with debt service carrying charges at 8% of expenditures and a large pension and other post-employment benefit obligation ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9884 To the Mayor and Members of the City Council May 17, 2016 h�T�i7 pG �r%4 Si { �i7 Y *a SUBJECT: RATING AGENCY RESULTS ASSOCIATED WITH THE 2016 DEBT rrn PLAN Water and Sewer Improvement and Refunding Revenue Bonds, Series 2016, Rating Moody's- Aa1 with a Stable Outlook Fitch: AA+ with a Stable Outlook Standard and Poor's: AA+ with a Stable Outlook, upgraded from a AA Credit Opinions — Highlights of Rating Agency Comments Moody's noted that the "Aa1" rating reflects strong characteristics of a large system that acts as a regional provider of water and sewer services, stable financial performance and metrics including debt service coverage with stable, yet below average days cash on hand. The rating also incorporates strong rate management and capital planning, as well as a manageable debt profile and relatively weak legal provisions for the bonds with a sufficient rate covenant and a lack of an established debt service reserve. Fitch noted the following rating drivers to support their AA+ rating: • Stable Revenue Source • Ample Operating and Financial Flexibility • Moderate Decline in Financial Profile • Extensive Needs but Pay-Go Funded • Large and Diverse Regional Economy Standard & Poors noted the following factors in their upgraded AA+ rating: • A broad and diverse service area that includes retail and wholesale service for a population over one million in a metropolitan statistical area they deem as strong • The system's strong operational profile, with raw water provided by the Tarrant Regional Water District helping to reduce some financial and operating risks to the City • A pass-through of wholesale rate increases and a regular review and as-necessary adjustment of base rates to preserve the system's financial risk profile Drainage and Utility System Revenue and Refunding Bonds, Series 2016, Rating Moody's- Not Rated Fitch: AA+ Standard and Poor's: AA+ ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9884 To the Mayor and Members of the City Council May 17, 2016 h�T�i7 pG �r%4 Si { �i7 Y *a SUBJECT: RATING AGENCY RESULTS ASSOCIATED WITH THE 2016 DEBT rrn PLAN Credit Opinions - Highlights of Rating Agency Comments Fitch lists the following rating drivers to support their AA+ rating: • The bonds are secured by a very stable and predictable revenue stream with the fixed drainage fee comprising a nominal 8% of the total utility bill • The low cost of maintenance of utility assets • A moderate decline in the financial profile • $300 million to $400 million of critical system needs expected to be addressed in the foreseeable future which will be funded solely on a pay-go basis • Fort Worth is a major anchor in the Dallas-Fort Worth regional economy Standard & Poor's noted the following factors in support of their AA+ rating: • A broad and diverse service area that includes retail and wholesale service for a population over one million in a metropolitan statistical area they deem as strong • The system's limited operational risk as it is fully compliant with its municipal separate storm sewer system permit • A regular review of rates — management is constantly monitoring revenue requirement and capital investment needs of the system Next Steps in the Process The bonds will be sold on a competitive basis and priced in the market on May 25t". Subsequent to pricing, the City will submit the transactions to the Texas Attorney General for approval. Closing of the transactions is anticipated to occur on June 28t". Staff will prepare an Information Report after pricing is completed. If you have any questions, please call Aaron Bovos, Chief Financial Officer, at 817-392-8517. David Cooke City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9885 To the Mayor and Members of the City Council May 17, 2016 OX Page 1 of 4 SUBJECT: MARCH 2016 — SALES TAX UPDATE Y073 Sales tax revenue represents approximately twenty-two percent (22%) of the City's General Fund anticipated revenue in Fiscal Year 2016. It is the second largest revenue source, with property tax being the largest. In addition, sales tax revenue represents the largest revenue source in the Crime Control and Prevention District Fund. Staff is committed to providing regular updates on this important and sometimes volatile revenue source. The Texas Comptroller's Office posted March 2016 (Fiscal Year 2016, Period 6) collection results on May 11th. Actual receipts are dependent upon the timeliness and accuracy of sales tax payers' returns. This report provides Fort Worth's sales tax collection compared to last year and the impact on the current year's budget. MARCH NET SALES TAX COLLECTIONS (10-YEAR HISTORY 0 o 9 $10.2 $9.9 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 The City's net sales tax collection is up $505,609 or 4.0%, compared to the same month last year. As depicted in the table below, the City experienced $649,331 or a 5.1% increase when compared to last year's collections for the same month. Current period collections include only transactions that occurred within the month, so this number reflects pure economic activity. COLLECTION DETAIL FOR CITY SALES TAX March 16 March 16 Variance ($) Variance (%) Current Period Collections $12,658,142 $13,307,473 $649,331 5.1% Other Collections*** 125,612 93,168 (32,444) (25.8%) Audit Collections 250,905 141,860 (109,045) (43.5%) Service Fee (260,693) (270,850) (10,157) (3.9%) Retainage (74,474) (66,550) 7,924 10.6% Net Collections $12,699,492 $13,206,102 $606,609 4.0% ***OTHER COLLECTIONS ARE PAYMENTS ATTRIBUTED TO PRIOR PERIOD COLLECTIONS, FUTURE PERIOD COLLECTIONS AND UNIDENTIFIED COLLECTIONS.FOR MARCH 2015,OTHER COLLECTIONS WERE HIGH DUE TO PRIOR PERIOD COLLECTIONS.OTHER COLLECTIONS FOR MARCH 2016 ARE LOWER DUE TO REDUCED AMOUNTS RECEIVED FOR PRIOR PERIOD COLLECTIONS COMPARED TO MARCH 2015. CURRENT PERIOD COLLECTIONS Change Compared to Same Month in Prior Year 5.9% 5.5% 5.1% 3.9% 3.9% 3.8% 1.9°/0 0.70%. 0.90% 0 2°Io 0.1% Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 C_ Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 (1.2)% ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS