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New Issue: Hoover (City of) AL Global Credit Research - 10 Dec 1999 Hoover (City of) AL Contacts James Edward Bodley, Jr. [PHONE REDACTED] Gwyn Adams-Land [PHONE REDACTED] Moody's Rating Issue Rating General Obligation Warrants, Series 1999B Aa3 Sale Amount $25,470,000 Expected Sale Date 12/15/09 Rating Description General Obligation MOODY'S ASSIGNS A Aa3 RATING TO THE CITY OF HOOVER, ALABAMA'S GENERAL OBLIGATION WARRANTS, SERIES 1999B. $83.15 MILLION OF DEBT AFFECTED. Opinion Moody's Investors Service has assigned an Aa3 rating and stable outlook to the City of Hoover's General Obligation Warrants, Series 1999B. The rating reflects the city's long-term trend of strong financial operations resulting in substantial reserves, high wealth levels and substantial taxable resources which support a moderate amount of debt. REGIONAL ECONOMY PROVIDES FOR SUBSTANTIAL TAXABLE RESOURCES AND ABOVE AVERAGE WEALTH LEVELS The City of Hoover is primarily a residential suburb located just south of Birmingham with wealth levels that are far above those of the state and nation. Moody's expects continued high grade development in part because of its favorable location within the state's largest metropolitan area. Per capita income was 191% of the state average and 152% of the national average in 1990. The city experienced rapid growth in the 1970s and 1980s, but city officials anticipate continued growth to mirror more moderate rates of recent years. Moody's believes commercial development will continue as evidenced by the recent opening of a large national hardware store chain, a sizeable restaurant and the relocation of a major local automobile dealer. A large regional shopping mall is the center of commercial activity and provides approximately 25% of the city's total revenues. Commercial and industrial activity has historically been somewhat limited in Hoover as most residents work in Birmingham. However, retail development surrounding the regional mall well-exceeded original estimates and now provides the city with a ---PAGE BREAK--- considerable employment base. As such, the city's unemployment rate, currently at 1.1%, is very low. SOLID FINANCIAL POSITION CHARACTERIZED BY CONTINUED OPERATING SURPLUSES AND SUBSTANTIAL GENERAL FUND RESERVES Hoover's financial position continues to improve, fueled by strong local retail and commercial activity in fiscal 1998. Financial operations, historically driven by sales tax revenues, displayed a strong performance at year end fiscal 1998 with the total General Fund balance comprising approximately 39% revenues. Unaudited fiscal 1999 results display another General Fund surplus and a total General Fund balance of $25.6 million or 44% of revenues. As a result of strong sales tax revenue growth and retention of surpluses in prior years, the city's undesignated General Fund balance has grown from 14.6% of revenues in fiscal 1995 to 32.3% in fiscal 1998. Fiscal 2000 is budgeted for a moderate General and Special Revenue Fund surplus. Moody's believes the city's trend of well-managed financial operations, characterized by successful implementation of expenditures controls, historical conservative budgeting practices, and steady increases in the undesignated general fund balance, will continue. City officials report that all of its critical information technology systems, including all financial management systems, are Year 2000 compliant. The cost of such conversion is not expected to affect the financial condition or operation of the city. The city has contacted outside vendors and have determined that key external suppliers of goods and services are Year 2000 compliant. ABOVE AVERAGE DEBT LEVELS EXPECTED TO REMAIN MANAGEABLE While overall debt levels are somewhat above average at 5.4%, the city's direct debt comprises only 35% of the total and remains very manageable. Payout is moderate with 42% retired in ten years. Consequently, while the city is contemplating issuing an additional $25 million within the next couple of years to potentially finance a new municipal complex, Moody's expects the city's debt burden will remain manageable. The city's financial flexibility and considerable resources which include strong General Fund reserves and growing tax revenues are expected to accommodate the additional debt service although payout will slow over 20 years. Principal payments of the Series 1999B warrants will be layered within the city's existing debt retirement schedule, providing for relatively level overall debt service requirements. The current issue will finance various capital improvements within the city, including the expansion of a public library and road and bridge improvements. KEY STATISTICS 1998 population 60,000 (estimated) 1990 population: 39,788 1998 full valuation (estimated): $4.4 billion Debt burden: 5.4% Payout of bonded debt principal (10 years): 42% FY'99 Total General Fund balance as % of revenues: 44% Outlook ---PAGE BREAK--- The stable outlook is based upon Moody's expectation that the city's trend of sound financial operations will continue. Additionally, the stable outlook is based upon our expectation of continued, moderate growth of taxable values and the city's ability to manage above average debt levels. © 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. 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