Fitch Rankings upgraded the District of Columbia’s ballpark revenue bonds Series 2006A and 2006B to AA from AA-minus, a development that Washington officials consider highlights the strong current and future position of the unique city.
“This Fitch upgrade reflects our financial stability and the strong economic prospects of the district,” said Chief Financial Officer Glen Lee. “The improved rating underscores the resilience of our revenue structure and the expansion of our pledged ballpark fees and utility tax revenues.”
The rankings adjustment, announced Wednesday, includes the District of Columbia ballpark revenue bonds, series 2006A-1, 2006A-2, and 2006B-1. It also features a stable outlook.
“This Fitch upgrade reflects our financial stability and the strong economic prospects of the district,” said Chief Financial Officer Glen Lee. “The improved rating underscores the resilience of our revenue structure and the expansion of our pledged ballpark fees and utility tax revenues.”
Christopher Mobley
Per Fitch’s statement, “The upgrade of the 2006A and 2006B bonds reflects improved long-term resilience of the structure to very strong levels, in addition to growth prospects for pledged District ballpark fees and utility tax revenues. Fitch doesn’t incorporate stadium-related revenues into its evaluation given their volatility and unpredictability.”
Negative aspects that might affect future adjustments include “large and sustained delinquency in ballpark fee filers leading to coverage levels below 2.3x, sustained stagnation or decreases in ballpark fees and/or utility tax revenues, or sizable increased leverage of the important thing revenue sources.”
Positive aspects that might further boost the rankings higher include growth in key pledged revenues consistently and continued reduced leverage through early redemptions.
Nationals Park, which hosts Major League Baseball’s Washington Nationals, was built from scratch in 2008 for a complete cost of $783.5 million which included $535 million in revenue bonds. In response to the CFO, the revenue receipts are exceeding the stadium’s debt service.
In July, Lee signed off on a proposal to siphon more money not used for ongoing debt service right into a Ballpark Maintenance Fund supported by the prevailing Ballpark Revenue Fund.
The proposal to create the fund was first unveiled by D.C. Council Chairman Phil Mendelson in January.
Per the proposal, “The Ballpark Revenue Fund is pledged to repay District debt taken out to construct the stadium and forecasted revenues in excess of debt service through 2028 are also transferred to the District’s General Fund to assist balance the budget and financial statement.”
“Starting when the Ballpark Revenue Bonds have been fully repaid, and provided the authorized transfers to the District’s General Fund have been made, the CFO must deposit the Ballpark Sales Taxes, and the stadium rent into the Ballpark Maintenance Fund.”
On the time, Lee’s office indicated that there is enough money within the fund to support the plan through fiscal 12 months 2028.
Fitch notes support for the bonds comes from the pledged ballpark fee with over $5 million in annual gross receipt, together with utility taxes. Lee’s office is required by law to maintain the fees high enough to cover the debt service without having approval required from the Mayor, Council, or Congress.
The District of Columbia has a singular budgetary process that requires it to submit four-year budgets that must remain in balance and are subject to Congressional oversight.
It’s restricted from taxing the incomes of nonresidents who work in the town and might’t levy taxes on industrial property owned by the federal government, which accounts for roughly 40% of the industrial real estate.
The upgrade joins an upgrade from Moody’s Rankings in early October of 5 different special tax bonds.