Fitch Upgrades New Orleans Audubon Park Commission, LA's GO Rating to 'BBB'

• Press Release
• Source: Fitch Ratings
• On 2:58 pm EDT, Friday September 18, 2009

AUSTIN, Texas--(BUSINESS WIRE)--During the course of routine surveillance, Fitch Ratings upgrades its rating on the New Orleans Audubon Park Commission's (the commission) outstanding $32 million general obligation (GO) aquarium bonds to 'BBB' from 'BBB-'. The Rating Outlook is Stable.

The upgrade reflects ongoing economic recovery in New Orleans, as evidenced by a number of indicators, including tax base and population growth, increased tourism traffic, increasing property tax collection rates, and commercial, residential and public rebuilding activity. The rating further reflects ample taxing margin under the commission's limited tax rate cap and financial challenges that continue due to attendance levels that have not returned to pre-Katrina levels. Recent spending reductions and fee increases should help strengthen the commission's financial profile over the next several years. An immediate challenge is the commission's ability to resume full support of debt service payments from commission revenues due to the fact that state loan proceeds for debt service have been exhausted.

The commission operates the Aquarium of the Americas, which reopened in May, 2006 after completion of storm-related repairs (the commission also operates the Audubon Zoo and the recently opened Insectarium). Aquarium debt is repaid through a limited property tax levied against all taxable property in New Orleans. The sizeable increase in New Orleans taxable values since 2006 has generated additional taxing margin for both the commission's GO debt service obligations and operations. Taxable values in the city jumped more than 10% in 2007 and nearly 38% for 2008, the latter gain the result of assessments more closely tied to actual market values; the valuation increase in 2009 was more modest at around 2%. The 2008 increase enabled the commission to lower its millage rate by nearly 30%, generating much needed taxing flexibility going forward; the current millage rate is 3.31 mills. Tax collections also have improved; at more than 85% last year, the rate of current collections is approaching historical averages.

Financial results at the commission since 2005 have been uneven, with annual losses and generally declining liquidity. The commission faced enormous challenges in the months following Hurricane Katrina in August 2005 - most notably damage to and closure of facilities and sharply reduced visitor traffic when facilities re-opened. While fee revenues have increased at a steady pace as tourism has recovered, expenses also have increased. To correct a budgetary imbalance that emerged after personnel additions that occurred in 2008, staff reduced salary outlays by nearly 10% for 2009. This measure and other spending reductions and a $0.50 fee increase at commission facilities are expected to contribute to a $1 million surplus for 2009. Staff is anticipating another $0.50 fee increase for 2010. Cash and investments at 2008 year-end totaled $1.1 million, below the commission target of $2 million-$2.5 million.

Visitor traffic at commission facilities is increasing, with 2009 expected to register gains despite recessionary pressures. The 1.58 million total visitor count for 2008 was up roughly 5% from the prior year, and commission staff projects attendance (excluding the recently opened Insectarium) will increase another 10% to 1.75 million for 2009. Staff projects that 2009 zoo attendance will be more than 90% of 2004 (pre storm) levels and aquarium attendance will be nearly 75% of 2004 levels.

The commission utilized roughly $15 million of state tax credit loan money to make its debt service payments through mid-2009 on its GO debt and its $4.4 million in outstanding revenue debt (not rated by Fitch). While the resumption of debt payments from commission revenues will generate some additional financial pressure, GO bondholders derive an additional measure of protection from the requirement that property tax revenues are applied first to debt service and remaining revenues may then be used for other aquarium-related purposes. The commission reportedly has no near-term borrowing plans.

(For more information on the recovery of New Orleans, please see the press release 'Fitch Upgrades New Orleans, LA GOs' dated April 13, 2009 available on Fitch's web site at 'www.fitchratings.com'.)

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings
Steve Murray, 512-215-3729 (Austin)
Jose Acosta, 512-215-3726 (Austin)
Media Relations:
Cindy Stoller, 212-908-0526 (New York)
cindy.stoller@fitchratings.com