Fitch Affirms Boulder County Nederland Community Library District (CO) at 'A'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed the following Boulder County Nederland Community Library District, Colorado's general obligation (GO) bonds:
--$1.7 million GO bonds, series 2009 at 'A'.
The Rating Outlook is Stable.
The GO bonds are secured by an unlimited ad valorem tax levied against all taxable property within the district.
KEY RATING DRIVERS
LIMITED BUT STABLE OPERATIONS: The library district is a special purpose district with limited operating pressures and is funded almost entirely from property taxes levied on a narrow tax base.
SOUND OPERATING FLEXIBILITY; LIMITED FINANCIAL CUSHION: The district has a reasonable degree of both revenue and expenditure flexibility. The general fund reserve level is high as a percentage of spending but is nominally low.
BEDROOM COMMUNITY: The district benefits from its proximity to the dynamic Boulder metro economy as well as to recreational facilities. County income levels are above average.
LOW DEBT BURDEN: Debt ratios are low, with no additional issuance planned. The district has no liabilities related to pension or other post-employment benefits (OPEBs).
SUSTAINED TAX BASE LOSSES: Large and sustained tax base losses would negatively pressure the district's financial operations and debt service.
Located 17 miles west of Boulder and encompassing 60 square miles, this small district (estimated population of about 4,400) serves primarily the Town of Nederland as well as the surrounding unincorporated areas. Voters in 2002 approved the creation of the district by the county as well as an initial 2.5-mills operating tax levy. The maximum allowed rate was subsequently increased to 5 mills in 2010.
BEDROOM COMMUNITY, AV RESUMES GROWTH
Residents of the district benefit from the region's dynamic economy and broad employment base. Largest employers of Boulder County include the University of Colorado Boulder, IBM, Seagate, Amgen, and other high-tech companies, as they recruit from the area's highly educated workforce. The county also has favorable unemployment rates (3.2% in August 2015) compared with the state (3.3%) and the U.S. (4.9%). The town of Nederland enjoys above-average median household income, most recently at 107% and 118% of the state and national levels, respectively.
Assessed valuation (AV) experienced recessionary decline of 7.3% in the 2012 reassessment year then flattened for the 2014 reassessment. However, improving home values produced strong AV growth of 13.5% for 2016. Expectations of near-term stability are supported by Zillow's report of 8% average growth in Nederland home valuation since 2012.
SATISFACTORY FINANCIAL OPERATIONS; REVENUE AND EXPENDITURE FLEXIBILITY
The district operates with only one fund: bond proceeds, debt service, capital expenditures, and operating revenues and expenditures all flow through the general fund. At 2014 year end, the district maintained $190,000 in unrestricted general fund balance, which is equivalent to 53% of spending. Although high in percentage terms, the reserve is small in size.
Financial performance for 2015 year-to-date is generally on track, with both revenues and expenditures outperforming conservative budget assumptions. On a budgetary basis, management expects a small surplus at the end of 2015. This projection appears reasonable given results so far.
The district has some degree of revenue flexibility, as its current operating tax rate of 4.4 mills is below the cap of 5 mills. The district plans to use improving tax revenues to increase library staffing in 2016. Additionally, $10,000 is set aside in the balanced budget for future development of land adjacent to the library.
The district has a track record of outperforming its budgets. Fitch expects conservative financial management to continue and result in generally break-even operations and maintenance of sufficient reserves.
LONG-TERM LIABILITIES MANAGEABLE
Total debt ratios are low at $1,077 per capita and 0.3% of market value. There is no remaining GO debt authorization, and the district has no current plans to return to voters. The new library was built in 2011.
The series 2009 bonds are the only direct debt of the district, and it amortizes slowly. Debt service carrying costs are high and account for 38% of total governmental spending in fiscal 2014, which is not unusual for special purpose districts. In addition, the district does not provide pension or OPEBs for its small workforce.