The 2005 certificates are direct obligations of the county, payable from the levy and collection of a continuing ad valorem tax limited to $0.80 per $100 assessed valuation on all taxable property within the county. In addition, the certificates are payable from certain limited revenues of the county's park system. Proceeds of the certificates will be used for the construction, renovation, expansion, and equipment of various county facilities and parks and to pay issuance costs.
The 'A+' rating considers the county's low direct debt burden, solid tax base growth, sufficient but diminished general fund reserves, and its reliance on bridge system surplus revenues. A three-month loss of federal inmates in fiscal 2004 led to the county's second consecutive annual operating deficit in the general fund, resulting in modest reserves and a diminished cash position. Adoption of an austere fiscal 2005 budget has stabilized the county's financial position, and substantial interfund borrowing remains available to provide liquidity if needed. Near-term stabilization of finances and restoration of reserves to more appropriate levels remains key to maintenance of the current rating. The county's debt profile remains favorable, especially after deducting enterprise fund-supported debt. General fund performance is tied to the success of bridge system operations, which are satisfactory despite a modest decline in total bridge traffic due to heightened security after the events of Sep. 11, 2001. Growth in assessed valuation has allowed the county to maintain fairly stable tax rates. While unemployment rates are high when compared with those of other regions and income levels are low, the local economy has improved and is well positioned for continued development.
Cameron is the southern-most county in Texas and posted a 2000 census population of approximately 335,000, a 30% increase over the 1990 census count. The largest cities within Cameron County are Brownsville, Harlingen, and San Benito, and it is the 11th largest county in the state. Major components of the economy include trade, manufacturing, and tourism. The Port of Brownsville is an important link with Mexico and affords the only entry point on the border accessible by four modes of transportation. Transportation initiatives will likely result in the establishment of a new federal interstate highway with an end point in Brownsville that will eventually connect with Canada. Manufacturing plants are a significant factor on both sides of the U.S./Mexico border, with a major presence of maquiladoras, or 'twin plant' manufacturers, in Matamoros, Mexico. Also, South Padre Island, bird and wildlife sanctuaries, and proximity to Mexico are all prominent tourist attractions.
The escape of several federal inmates in March 2004 led the U.S. Marshall's Service to pull its remaining inmates from the county's jail system citing insufficient security. After numerous upgrades, these inmates were returned in June 2004 but their three-month absence resulted in the loss of $2.5 million in charges for services and a $1 million general fund deficit in fiscal 2004. Subsequently, the federal inmate population has remained stable and per diem revenues are on budget at $3.6 million for fiscal 2005. The initial fiscal 2004 deficit projection of $2.9 million was mitigated by midyear budget reductions of $1.9 million. As a result, fiscal 2004 posted a modest $2.3 million general fund balance equal to 4.4% of spending, down from previous reserve levels of 9%-10%. An austere fiscal 2005 budget, which did not provide any salary increases, is projected to maintain fund balance levels. Reserve levels are currently below other similarly rated counties. Financial stabilization and improved reserve levels will be an important credit consideration in maintaining the county's rating.
Growth in taxable assessed valuation has enabled the county to maintain a relatively stable property tax rate over the past several years while meeting increasing service demands related to population growth. Taxable assessed values (TAV) have grown by a compound annual average of 9% since fiscal 1999. Notably, building permit values remained steady during the recession and have accelerated to a record high $464 million in fiscal 2005. Property tax revenues constitute 53% of resources.
Along with valuation growth, county finances benefit from transfers of surplus revenues of the bridge system operations. This enterprise function transferred $7.7 million to the general fund in fiscal 2004, or 16% of general fund resources. Due to heightened security after the events of Sep. 11, 2001, total bridge traffic growth slowed to 1.8% in fiscal 2002 and actually declined by 3.3% and 1.5% in fiscal years 2003 and 2004, respectively. However, toll increases in October 2003 have resulted in net revenue increases.
The current offering will finance the construction and equipment of several annex buildings, a social services center, and the renovation of the former Levis Strauss building into county offices. The direct debt burden of the county is very low and now totals $113 per capita and 0.4% of TAV. Overlapping debt raises overall debt ratios to a moderate $1,043 per capita and 3.6% of TAV once adjusting for substantial state support for local school district debt. Principal payout is moderately above average, with almost 60% retired in 10 years. The county has under $3 million in authorized but unissued unlimited tax road bonds.
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.
© 2005 Business Wire
