12-12-05
Full Report From Moody’s Investment Service
MOODY'S ASSIGN A1 RATING TO PORT OF BELLINGHAM [WA] LIMITED TAX G.O. BONDS
APPROXIMATELY $17 MILLION IN DEBT AFFECTED, INCLUDING CURRENT SALE
Port of Bellingham, WA
Ports
Washington
Moody's Rating
Issue Rating
Limited Tax General Obligation Bonds A1
Sale Amount $5,000,000
Expected Sale Date 12/15/05
Rating Description Limited Tax General Obligation Bonds
NEW YORK, December 12, 2005 -- Moody's Investors Service has assigned an A1 rating to the Port of Bellingham [WA] Limited Tax General Obligation Bonds,
2006 [$5.0 million]. Moody's has also affirmed the A1 rating on the port's outstanding $12 million in limited tax general obligation debt. The bonds are secured by the full faith and credit of the port within the constitutional and statutory limitations of non-voter approved debt. Proceeds will be used to fund a variety of capital improvements at the port's facilities. The A1 rating reflects the port's growing tax base, expanding local economy, a diverse revenue stream which supports stable financial operations, and a manageable debt position.
PORT BENEFITS FROM GROWING LOCAL ECONOMY
Moody's expects the port to continue to benefit from local economic development and diversity and tax base growth. The port is coterminous with Whatcom County (UTGO rated Aa3); the majority of economic activity occurs in Bellingham, the county seat (also rated Aa3), which is also home to approximately half of the county's population. The area serves as a regional trade center with retail activity drawing demand from northern Washington and Canada. Further, the on-going expansion of local hospital facilities has solidified the region's presence as a center for healthcare. Oil refining and related energy production play a significant role in the county's economy comprising close to 6% of the overall tax base; operations at BP West Cost Products, the county's largest taxpayer, remain strong. Current enrollment at Western Washington University of 11,700 is expected to increase by approximately 15% over the next decade. Residential, commercial and industrial development have led to healthy appreciation in assessed valuation (A.V.).
Though growth averaged roughly 6% annually from 2000 to 2005, the A.V.
increase in 2005 alone was a strong 11.2%. Management expects a similar increase for 2006. Resident wealth levels in the county are slightly below that of the state. Per capita and median family income are 87.2% ($20,025) and 91.8% ($49,325) of state levels, respectively, while full value per capita is a healthy $80,657.
DIVERSE REVENUE STREAM SUPPORTS STABLE FINANCES
Moody's expects the port's financial operations to remain stable, as revenues outpace projections and expenditure growth is kept at manageable levels. Port operations generate a diverse revenue stream which is supplemented by property tax revenues, providing added financial flexibility. Typical of many ports in the State of Washington, the property tax levy brings in a large portion of revenues and the Port of Bellingham's levy rate of $0.38 is below the statutory maximum of $0.45. Management plans to recoup some of its "banked capacity" levy increase from previous years, which should bring in roughly an additional $300,000 (out of $5.9 million in total receipts). Still, officials expect that the total levy will continue to drop as A.V. experiences strong growth and the I-747 1% levy growth limit remains in place. The port also enjoys a generally favorable cash position; port policies call for cash reserves to include one year of its revenue bond debt service, plus three months of projected operating expenses, and a $1 million emergency reserve.
Cash reserves should continue to exceed these policies.
GENERAL OBLIGATION DEBT BURDEN IS MINIMAL
Moody's expects the port's debt burden to remain minimal; including the current offering, the port's direct debt burden is just 0.12% (debt outstanding as a % of 2005 assessed valuation). Proceeds of the current sale will be used to fund a variety of port capital improvement projects.
Management expects to continue to issue limited tax G.O. bonds occasionally over the long term to fund capital projects. Amortization of limited tax G.O.
principal is rapid with 51.0% of principal retired in 10 years. The port currently has about $25 million of outstanding revenue bonds, rated A2.
GEORGIA PACIFIC PROPERTY PURCHASE DEFINES FUTURE REDEVELOPMENT AND GROWTH
The port recently purchased a 137 acre site from Georgia Pacific. Port officials expect to redevelop the site with support from the city, federal government and state Department of Ecology, creating a public area including multi-use development and a new marina. As part of the purchase, the port took on the responsibility for Georgia Pacific's share of environmental cleanup; the cost of the clean is estimated to be just over $40 million. The port will be paying half of the cost up-front with funds from an insurance settlement and cash reserves; the remainder will come from promised state and city grants. Cost overruns have been insured against through AIG. The cleanup is under no time constraint and the timeline can be adjusted as needed.
Demolition of unnecessary structures on the site is currently underway.
KEY STATISTICS
2004 estimated population: 180,167
1999 per capita income (Whatcom County): $20,025 (87.2% of state median)
2005 assessed valuation: $14.5 million
2005 A.V. per capita: $80,657
Average annual growth in A.V., 2000-2005: 5.8%
Direct debt burden: 0.12%
Payout of LTGO principal (10 years): 51.0%
FY04 operating ratio: 76.5%
ANALYSTS:
Jeffrey Thomas, Analyst, Public Finance Group, Moody's Investors Service Patrick Ford, Backup Analyst, Public Finance Group, Moody's Investors Service
CONTACTS:
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
Copyright 2005, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together, "MOODY'S"). All rights reserved.
