Port Huron MI $8M Limited Tax GOs Rated `A' by Fitch IBCA
8 June 1999
Port Huron MI $8M Limited Tax GOs Rated `A' by Fitch IBCA
NEW YORK--June 7, 1999: Fitch IBCA assigns its `A' rating to Port Huron, MI's $8,000,000 general obligation limited tax bonds, series 1999A. The bonds are scheduled for competitive sale on June 14, 1999. Dated June 1, the bonds mature serially Oct. 1, 2000-2019. Semi-annual interest payments commence Oct. 1, 1999. Bonds maturing on or after Oct. 1, 2009 are subject to optional redemption beginning Oct. 1, 2008. Proceeds of this issue will finance improvements to the city's water and wastewater systems. The bonds are limited tax general obligations of the city, and constitute a first budget obligation. However, the city intends to make debt service payments from the net revenues of its water and sewer systems.The rating reflects the city's growing economic base, steady financial performance, and moderate debt levels. Port Huron is located in on the western shore of Lake Huron 60 miles northeast of Detroit, and has a population of 32,459. The Blue Water International Bridge connects the city with Sarnia, Ontario, one of three international entry points in the state of Michigan.
Growth in the manufacturing sector, notably the auto parts industry, contributed to a 2% annual increase in the city's employment base between 1991 and 1996. As employment grew faster that the 0.9% annual growth in the labor force, the city's unemployment rate declined to 6% for 1998, from a high of 14.3% in 1991. While manufacturing spurred the city's employment gains, posting a 5.2% growth rate, the service sector is the leading source of employment in the city, accounting for 25.4% of the workforce.
The improved growth is reflected in the city's property tax base, which recorded a 6.5% annual increase in values between 1992 and 1999. Construction value averaged $17.2 million over the past three years, with activity split fairly evenly between residential and commercial projects. Personal property values also increased, reflecting stepped up investment in local manufacturing facilities. The city's property tax base is somewhat diversified, as the 10 leading taxpayers hold 21% of the total taxable value.
Benefiting from a strong economy and modest spending growth, the city achieved steady financial performance. The general fund balance remained at 10% of general fund expenditures for the past three fiscal years. General fund revenues increased 4.3% annually between 1996 and 1998, as the strong economy bolstered property and income tax receipts. Expenditures increased at a 4.6% annual rate, largely due to overtime in the city's public works and public safety departments. With sustained growth in the economy and favorable employee contracts in place through 2002, the city's stable financial trend should continue.
This issue, along with the simultaneous issuance of $7.7 million in bonds to the state revolving fund and a $10 million loan issued to the Michigan Municipal Authority's insured pool, represents the first phase of the city's $110 million, 15-year project to separate its sanitary and storm sewers. These issues account for all of the city's outstanding debt, leaving its direct debt levels at a moderate $794 per capita and 2.1% of full value. As the sewer project continues, the city's debt levels will increase slowly. However, additional capital needs are minimal as the city's buildings are in good condition and road improvements are financed by a 1993 voter-approved 2-mill property tax levy. Furthermore, the city plans to repay the bonds through the net revenues of its water and sewer systems, limiting the burden on the property tax base. The city's overall debt levels are moderate, standing at $1,112 per capita and 2.9% of full value.