HomeMy WebLinkAboutIR 10017 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10017
To the Mayor and Members of the City Council June 13, 2017
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*a SUBJECT: RESULTS OF MULTI-PURPOSE ARENA RATING AGENCY
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Background
On May 17, 2017, the City hosted rating analysts from Moody's, Fitch, and Standard & Poor's to
provide an overview of the Multi-Purpose Arena (Dickies Arena) and the associated financing
plan and debt structure. City staff, elected officials, and multiple partners attended the meetings
to assist in telling our story of the public private partnership which will result in this new facility.
The discussions with Standard & Poor's were terminated prior to conclusion, as the City elected
to proceed with the ratings on the bonds from Moody's and Fitch. A summary of the final rating
results is provided below.
Rating Summary
Moody's- Al with a Stable Outlook
Fitch: AA+ with a Stable Outlook
Highlights of Rating Agency Comments
Moody's noted that the "Al" rating reflects the large and growing Fort Worth economy while
recognizing the economically sensitive pledge of revenues, the satisfactory level of Maximum
Annual Debt Service (MADs) coverage expected to increase with the completion of the Dickies
Arena project, and the strong legal framework protecting bond holders.
Key Credit Strengths include:
• Large economic base exhibiting strong growth
• Growing pledged revenue stream with only one annual decline during the recession
• Strong legal framework protecting bond holders
Key Credit Challenges include:
• Somewhat narrow and economically sensitive pledge of revenues
The stable outlook is based on the expectation that the large and growing Fort Worth economy
will continue to support a stable base of pledged revenues and adequate debt service coverage
over the near term.
Fitch noted the AA+ rating on the special tax revenue bonds is based upon the strong pledged
hotel occupancy tax (HOT) revenue growth prospects and minimal historical revenue volatility,
which suggests little erosion in debt service coverage resiliency through a typical downturn.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10017
To the Mayor and Members of the City Council June 13, 2017
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*a SUBJECT: RESULTS OF MULTI-PURPOSE ARENA RATING AGENCY
rrn PRESENTATIONS
Strong growth prospects for pledged revenues: The city HOT is expected to increase given hotel
development activity both underway and planned in Fort Worth, as well as healthy longer-term
economic prospects for the city.
Sound Resiliency: the pledged city HOT revenues demonstrated minimal volatility over the past
15 years, suggesting very strong resilience through a typical recessionary scenario with little
negative effect on debt service coverage.
While not anticipated, sharp and sustained declines in pledged city HOT revenues would erode
currently sound debt service coverage and likely put downward pressure on the special tax
revenue bond rating.
Next Steps in the Process
The bonds will be sold on a negotiated basis and priced in the market on June 19th and June 20,
2017. Unique to this transaction, the City will offer a "retail order period" to our residents who
may be interested in purchasing the debt as a personal investment. In conjunction with our
financial advisors and lead underwriter, the City will launch a print advertisement campaign to
educate our community about the opportunity to purchase this debt before it is offered to
institutional investors.
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 July 12, 2017. Staff will prepare
an Information Report after the sales are 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