Moody’s Ups Burien’s Bond Rating In Time For Asphalt Overlay Project
Burien had “a great sale” of bonds on Aug. 16 totaling about $8.7 million to pay for the first phase of the city wide asphalt overlay project, city council members were told at their meeting that evening.
City Manager Mike Martin reported that Burien’s credit rating – and those of other cities – has been raised from A3 to A1 because “the bond market sees cities … as a good risk because they are unlikely to default.”
But this “good risk” status has not been extended “for those cities with financial problems,” Martin added.
Phase one of Burien’s 20-year, $19.4 asphalt overlay program is expected to begin on Ambaum Blvd. SW in late September. Work on the initial phase will continue for the rest of this construction season and throughout the 2011 construction season,
Two-inch asphalt overlays will be placed on more than 260 lane miles to restore and maintain city streets at an average Pavement Condition Index level of 80 percent. The current average condition of local streets is 68 percent.
A total of $2 million in limited tax general obligation bonds were sold, along with $6.71 million in taxable Build America Bonds.
“We’re not in the same circumstances as a lot of other cities,” Martin recently told city council members. “We’re not rich but our situation is good … council policies have us standing in good stead.”
In a cover letter to prospective bond buyers, Moody’s seemed to agree with Martin’s evaluation, giving Burien’s economy a good review and expressed confidence in the city’s current financial position.
“The city is a mature residential community which benefits from its location in the Puget Sound area and proximity to downtown Seattle and Sea-Tac Airport … between 2004 and 2009 the city’s assessed value increased a healthy 8.9% annually supported by mostly in-fill construction given the city’s mostly built-out status.”
Although assessed value declined 15 percent this year “due to the regional slowdown in construction activity combined with falling housing and condominium prices,” assessed value “is still somewhat sizeable at $3.6 billion.”
This year’s annexation of the southern part of the North Highline unincorporated area increased assessed value of property in Burien “by almost $1.1 billion (about 30%). Prior to the annexation, the city was essentially built out.
“Now, combined with ongoing downtown redevelopment projects, the additional developable land should help make it an increasingly attractive location given local growth management laws and overall development constraints in the Seattle area.”
Moody’s based the A1 rating “primarily on the city’s moderately sized tax base … manageable debt levels, and conservative financial management.”
Burien’s “direct debt burden is low, at 0.7%” although its “overall debt burden is well above average at 4.1%.” This difference is primarily due to “overlapping [Highline] school district debt.”
Debt service on outstanding city limited tax general obligation bonds totals 12.9 percent of general fund revenue annually – and Burien “does not plan to issue additional debt within the next three to five years,” the letter continued.
Moody’s assessment found that “city finances are characterized by conservative fiscal policies and careful budgeting practices. The city’s formal reserve policy … calls for a reserve of no less than 10 %. Since fiscal 2006, the city’s general fund balance has been well above this level.”
Burien’s general fund is “supported by a relatively diverse revenue stream including sales taxes (30%), property taxes (28%), and utility taxes (18%)” and, Moody’s reported, city government implemented budget cuts including across the board spending reductions” in response to a drop in sales tax revenue in 2009.
In addition to Ambaum Blvd. between SW 112th and SW 156th streets, phase one work will include asphalt overlays on 4th Ave. SW between SW 154th and 156th streets, S/SW 128th St. between Des Moines Memorial Drive and Ambaum, and SW 148th St. between Ambaum and 4th Ave. SW.
Except for Ambaum, this work will be done in 2011.
A $10 vehicle license tab fee will generate $300,000 to pay for the ongoing project beyond 2011, along with savings the city will realize by doing in-house some programs previously done by King County providing the rest of the money annually.