October 24, 2014
Moody’s Maintains Rio Nuevo’s A Bond Rating, Reduces Modifier from A1 to A2, Outlook Stable
Moody’s Investor Service, one of the bond ratings agencies that annually rates municipal bonds, today released an A2 rating for the Rio Nuevo bonds issued in 2008. A Moody’s A rating is the third highest letter rating, following AAA and AA. The Moody’s report cited strengths as the city of Tucson guarantee and the new Intergovernmental Agreement with the Arizona Department of Revenue that allows the District access to taxpayer data. Challenges identified include a historically weak tax collection mechanism relying on self-reported data and reduced tax collections.
Rio Nuevo and the State of Arizona recently announced a new agreement that will allow the District to monitor over 1,100 merchant returns for accuracy and timeless, which will address the rating agency’s concerns in future years.
Moody’s indicated that the rating could go up with an upgrade in the city of Tucson’s bond rating but could also go down if the city’s bond rating is reduced.
Rio Nuevo anticipates no new debt issued by the District and has relied on cash on hand, funds received from the city as part of the litigation settlement and proceeds from the sale of property to fund continued downtown development. Prior to the legislature seizing control of Rio Nuevo in 2010 the District spent approximately $300,000,000 on downtown area redevelopment. The District issued four series of bonds for approximately $125,000,000 of debt. Two of the four bonds have been paid off, about $75,000,000 of prior debt remains and is paid utilizing current sales tax receipts from area merchants.
The reconstituted District board has committed around $12,000,000 on very visible projects such as the newly renovated Tucson Community Center arena and the recently launched Marriot AC Hotel to be located downtown and will have approximately $10,000,000 remaining to help fund priority projects. The substantial majority of Rio Nuevo receipts will continue to go to repay debt issued before 2010.