Fitch Rates Peoria, AZ's $55MM GOs 'AAA'; Outlook Stable.
ENPNewswire-November 8, 2021--Fitch Rates Peoria, AZ's $55MM GOs 'AAA'; Outlook Stable
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Release date- 05112021 - Fitch Ratings has assigned a 'AAA' rating to the $54,945,000 GO bonds, series 2021 of the City of Peoria, AZ.
The bonds are scheduled for a competitive sale the week of Nov. 15. Proceeds will finance various transportation, drainage, public safety, and parks projects.
Fitch has also affirmed the following ratings of the city:
Long-Term Issuer Default Rating (IDR) at 'AA+';
Approximately $120.2 million unlimited tax GO bonds outstanding at 'AAA';
Approximately $27.9 million in Peoria Municipal Development Authority (MDA) revenue bonds at 'AA+'.
The Rating Outlook is Stable.
SECURITY
The series 2021 bonds and outstanding ULTGOs are payable from an unlimited ad valorem tax levied against all taxable property in the city.
The MDA excise tax revenue bonds (2011 and 2012) are payable from purchase payments from the city to the authority, by a first lien on excise taxes (comprised of local sales tax, franchise fees, licenses and permits, user fees and charges, fines & forfeitures, state shared revenues and miscellaneous revenues).
IDR ANALYTICAL CONCLUSION
The 'AA+' IDR is based on Peoria's exceptionally strong operating performance, solid expenditure flexibility, and low long-term liabilities. The rating also considers the stout revenue growth, development of sizeable reserves, and additional appropriations to address pension liabilities. The 'AAA' GO rating reflects the steady and strong tax base assessed valuation growth and expectations for continued gains due to ongoing development and population increases.
DEDICATED TAX ANALYTICAL CONCLUSION
The 'AA+' rating on the sales tax revenue bond obligations reflects strong pledged revenue growth prospects and bondholder protections as well as expected robust resilience during a typical economic cycle.
(SEE BELOW FOR DEDICATED TAX ANALYSIS)
Economic Summary
Peoria is situated northwest of Phoenix with a 2020 estimated population of 191,000 representing a greater than 24% gain since 2010. The city-owned Peoria Sports Complex anchors the city's entertainment district and hosts the Seattle Mariners and San Diego Padres major league baseball spring training and minor league activities. Peoria's participation in the broad Phoenix metropolitan economy contributes to its above-average demographics (employment and income levels).
IDR KEY RATING DRIVERS
Revenue Framework: 'aa'
Peoria's revenues realized growth in excess of GDP for the 10 years ended in fiscal 2020, and growth has been strong in recent years as the regional economy has returned to a solid expansion. Fitch anticipates solid revenue growth to continue based on residential and commercial development underway and planned. The 'aa' revenue framework assessment also considers the city's limited ability to independently raise operating revenues without voter approval.
Expenditure Framework: 'aa'
Fitch expects Peoria's natural pace of spending to grow marginally above revenues, with expenditure flexibility derived from the city's discretion on staffing and workforce costs. Debt service, pension and other post-employment benefit contribution carrying costs have been moderating and are not expected to pressure the operating budget given the city's plan to cash defease debt outstanding.
Long-Term Liability Burden: 'aaa'
Long-term liabilities are just over 7% of estimated personal income. Fitch expects this burden to remain consistent with an 'aaa' assessment, as population and income growth are likely to be aligned with the city's long-term liabilities.
Operating Performance: 'aaa'
Fitch anticipates Peoria will demonstrate strong financial resilience during a moderate economic downturn based on the city's solid expenditure flexibility, robust reserves, and established policies.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
For the IDR and GO bonds
Marked reduction in fixed carrying costs that enhances the city's expenditure...
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