S&P: Ruidoso Village, NM General Obligation Bond Rating Raised To 'AA' From 'AA-' On Improved Economic Metrics
"The upgrade is based on improvements in the village's economic metrics, including increases in projected effective buying income and total market value per capita," said S&P Global Ratings credit analyst Michael Stock.
The village's full faith and credit and an unlimited ad valorem property tax secure the bonds. We understand, however, that the GO bond ordinance allows Ruidoso to use other lawfully available funds for payment of principal and interest on the bonds. To date, the village has not levied a property tax to support debt service on the bonds, and instead it plans, in practice, to use wastewater net system revenue to support GO bond debt service. The GO bond ordinance also requires a debt service reserve funded at the least of 10% of bond proceeds, maximum annual debt service, or 125% of average annual debt service on the bonds.
The bond ordinance requires the village to immediately take steps to impose the ad valorem property tax at a rate sufficient to cover the debt service on the GO bonds. In the event the village wastewater net system revenue falls short of debt service requirements, we believe the debt service reserve as well as the village's available fund balances should provide sufficient liquidity for GO debt service until the village is able to impose and collect the pledged unlimited ad valorem property tax.
The rating reflect our opinion of the village's:Strong economy, with projected per capita effective buying income at 117% of the national level and market value per capita of $201,292; Adequate management, with "standard" financial policies and practices under our Financial Management Assessment methodology; Adequate budgetary performance, with operating results that we expect could deteriorate in the near term relative to fiscal 2015, which closed with an operating surplus in the general fund and break-even operating results at the total governmental fund level; Very strong budgetary flexibility, with an available fund balance in fiscal 2015 of 37% of operating expenditures; Very strong liquidity, with total government available cash at 48.6% of total governmental fund expenditures and 5.3x governmental debt service, and access to external liquidity we consider strong; Very strong debt and contingent liability profile, with debt service carrying charges at 9.3% of expenditures and net direct debt that is 25.4% of total governmental fund revenue, as well as low overall net debt at less than 3% of market value and rapid amortization, with 74.0% of debt scheduled to be retired in 10 years, but significant medium-term debt plans; and Very strong institutional framework score. The stable outlook reflects our expectation that the village will maintain a low overall debt burden and very strong budgetary flexibility and liquidity.
If Ruidoso improved its financial management practices, and it were to achieve balanced operations in its total governmental funds, and not significantly increase its debt burden, we could raise the rating.
Conversely, if the village's budgetary performance weakened and it were to significantly reduce its budgetary flexibility, which we do not expect, we could lower the rating.