Fitch Affirms Corpus Christi Bus & Job Dev Corp’s (TX) Sales Tax Bonds; Outlook Stable

Business Wire, July 09, 2010

AUSTIN, Texas — Fitch Ratings takes the following rating actions on Corpus Christi
Business and Job Development Corporation (the corporation), Texas’ sales
tax bonds as part of its continuous surveillance effort:

–Approximately $15.3 million sales tax revenue bonds (baseball stadium
project), series 2004 affirmed at ‘AA’;

–Approximately $40.8 million sales tax revenue refunding and
improvement bonds (arena project), series 2002 affirmed at ‘AA-’; and

–Approximately $36.2 million sales tax revenue bonds (seawall project),
series 2001 affirmed at ‘AA-’.

The Rating Outlook is Stable.

RATING RATIONALE:

–Debt service coverage remains consistent, although sales tax
collections are projected to fall below budgeted amounts for fiscal
2010, with only a modest increase anticipated for fiscal 2011.

–The maintenance of sizable reserves in each of the sales tax funds
provides a cushion against the periodic slowdown in sales tax
collections and enables the corporation to call bonds early, if desired.

–Financial oversight by Corpus Christi (the city) is strong.

–No further leverage of any of the dedicated sales taxes is planned.

–The city serves as a regional employment center, and while not immune
from the effects of the economic downturn, unemployment rates have
consistently been below state and national averages.

KEY RATING DRIVER:

The maintenance of solid debt service coverage levels and absence of
additional borrowing plans remain important credit considerations.

SECURITY:

The bonds are secured by a first lien on separate dedicated 1/8 of 1%
sales tax levies as well as separate debt service reserve funds. The
higher rating for the baseball stadium sales tax bonds reflects the
stronger debt service coverage and shorter maturity schedule.

CREDIT SUMMARY:

In two separate votes, city residents approved three individual
dedicated sales tax levies, equal to 1/8 of 1% each, for tourism
projects: a 10,000 seat arena adjacent to the city’s existing downtown
convention center, seawall improvements along the city’s bay front, and
a 5,000 seat minor league baseball stadium. The arena serves as a home
venue for several sporting teams and the men’s and women’s basketball
teams of Texas A&M University – Corpus Christi, and is also a venue for
concerts and convention center related events. The stadium has been
leased to Round Rock Baseball Inc., owners of the Corpus Christi Hooks,
an ‘AA’ franchise of the Houston Astros. Under the terms of the 15-year
lease, the company serves as the exclusive manager and operator of the
stadium and is responsible for the operations and maintenance of the
facility. The arena and seawall taxes were approved in 2000 to be levied
for 25 years, and the stadium tax was approved in 2002 for 15 years.

Debt service coverage levels for the arena and seawall bonds are about
1.6 times (x) to 1.7x for each, based on audited fiscal 2009 sales tax
revenues. Both series are characterized by level debt service schedules.
The baseball stadium sales tax bonds enjoy higher coverage levels, equal
to approximately 2.4x based on fiscal 2009 sales tax collections. All
three taxes are applied to the same transactions as the city’s general
purpose sales tax. Historical performance has generally been steady,
with sales taxes increasing on average 5.4% annually from fiscal
2004-2009. However, growth slowed considerably in fiscal 2009 to a
modest 0.2% from the prior year’s total. Further, the extension of the
economic slowdown is projected to result in an 8.4% decline for fiscal
2010. Officials report that recent monthly collections appear to have
stabilized, and modest growth is incorporated in the fiscal 2011
proposed budget. Even at reduced levels, sales tax debt service coverage
is projected to remain fairly consistent with past performance.
Furthermore, financial flexibility is maintained through the
availability of sizable reserves in each of the sales tax funds.

All three indentures share similar legal requirements, including a
standard debt service reserve fund and an additional bonds test of 1.25x
maximum annual debt service, although no additional leveraging is
anticipated for any of the taxes. All three indentures allow the use of
sales tax revenues for related construction projects not financed with
bond proceeds. In addition, the flow of funds for the baseball stadium
sales tax bonds provides for the use of up to $500,000 annually for
affordable housing purposes but only after payment of debt service and
construction fund requirements have been met.

With an estimated 2010 population nearing 300,000, Corpus Christi is the
eighth largest city in Texas and serves as the regional economic center
for a 12-county area. The economy consists primarily of petrochemicals,
shipping, tourism, agriculture, higher education, and military. The Port
of Corpus Christi (the port) ranks as the sixth largest in the nation
based on tonnage and 44th in the world. The planned $250 million La
Quinta Trade Gateway project includes a mixed-use container terminal
that is expected to diversify the port’s cargo, currently dominated by
petrochemical shipments
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