City of Santa Fe Receives Highest Credit Quality Bond Rating

Fitch Ratings Affirms City of Santa Fe with 'AAA'

The Rating Outlook is Stable

SANTA FE, NM – The City of Santa Fe recently received the highest credit quality bond rating, a 'AAA' from Fitch Ratings affirming the city’s outstanding bonds of: --$96.4 million in outstanding water utility system/capital outlay gross receipts tax (GRT) revenue bonds at 'AAA'. The Rating Outlook is Stable.

Fitch Ratings describe the City of Santa Fe’s credit profile as:

Historical financial performance has been strong, producing annual DSC coverage on all debt at a high of 2.3x in fiscal 2012. A five-year 8.2% annual rate hike package, with effective dates beginning in March 2009, has helped to maintain strong coverage results. All-in DSC is expected to decline to 1.8x in fiscal 2013 due primarily to the city's conservative forecast projections, although total DSC is projected to rebound to over 2.0x by fiscal 2016. Liquidity is very strong at nearly 1,000 days operating cash as of fiscal 2012. While liquidity is projected to decline to nearly half the current levels by fiscal 2017 since the city plans to cash-fund 100% of its capital improvement plan (CIP), it should remain above the category 'AAA' rating medians. Nevertheless, the maintenance of good DSC through the forecast period will be key in light of declining cash balances.

Other financial metrics are also solid, including surplus revenues averaging a high 2.9x of depreciation over the past five fiscal years. Individual water rates are high at 1.0% of MHI, but on a combined basis with wastewater charges, utility service is slightly more affordable at 1.9% of MHI. Given no additional rate increases are planned for the next five years, charges should remain relatively affordable.

The voters of the city approved a 0.25% municipal capital outlay GRT, which became effective on Nov. 10, 2004. The tax is dedicated for system capital and supply projects and accounts for approximately 16% of total system revenues. Fiscal 2012 receipts came in 3% higher than for the previous year after a period of year-over-year declines in fiscals 2009 and 2010. A 4% decline is conservatively projected for fiscal 2013, with 1% annual growth in receipts projected for fiscal years 2014 through 2017. GRT revenues add an additional revenue stream to the system, enhancing its financial profile.

Link to the full report from Fitch Ratings on the City of Santa Fe at: http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=803490