Fitch sees positive outlook for city bonds

Fitch Ratings has assigned a AA rating to Albuquerque's $39 million in general obligation general purpose bonds, series 2008A, and $4 million in general obligation storm sewer bonds, series 2008B.

The bonds are scheduled to sell competitively on May 19. Fitch also affirmed the AA rating on a number of outstanding city bonds. Those include $170.4 million in general purpose bonds, $42.2 in storm sewer general obligation bonds, $62.5 million in state-shared gross receipts tax bonds, $74.7 million in state-shared gross receipts tax/lodgers' tax bonds and $3.7 million municipal gross receipts tax bonds.

The ratings reflect a generally positive outlook for the city economically, according to the ratings agency. Fitch said Albuquerque has a broad and expanding economic base, a positive debt profile and manageable capital plans. City operations are heavily dependent on gross receipts taxes for support (72 percent of the general fund budget), but there has been sluggish growth recently in that revenue source, Fitch said, due to substantial contraction in housing construction.

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That coupled with management's decision to reduce the gross receipts tax rate has pressured the city's financial position, according to Fitch. Total fund balances are projected to decline substantially in fiscal 2008, it notes.

The ratings agency noted that the city closed a $65 million budget gap in order to balance its proposed fiscal 2009 budget and Fitch expects the city to restore its financial flexibility to previous levels.

While the residential market is lagging, the commercial building market has remained steady, Fitch noted, and numerous large pending commercial products could help stabilize building activity. It also said the city's development as a high-technology hub continues to attract higher wage industries and overall unemployment rates are at near-record lows.