Fitch Rates Port of Houston Authority, TX $9MM GO Bonds ‘AA+’
Fitch Ratings assigns an ‘AA+’ rating to Port of Houston Authority, TX’s (the authority) $9,000,000 unlimited tax refunding bonds, series 2004A (AMT). Fitch also affirms the ‘AA+’ rating on the authority’s $283,289,000 unlimited tax bonds outstanding. The bonds are scheduled to sell on Nov. 16 via a competitive sale. First Southwest Co. in Houston is the financial advisor. The bonds are payable from an unlimited ad valorem tax levied on all taxable property located within Harris County, Texas. Proceeds from the bonds will be used to refund a portion of the authority’s outstanding debt and pay costs of issuance.
The ‘AA+’ rating reflects the consistent growth and the breadth of the authority’s service area, economy, and tax base, its sustained favorable financial performance, and the port’s competitive position. The authority’s operations registered a strong performance in 2003, when operating revenues increased nearly 12% from the prior year and total cargo tonnage exceeded 30 million tons for the first time. Addressing capacity constraints is the focus of the authority’s long-term capital plan, which includes the ongoing widening and deepening of the Houston Ship Channel and new container facilities on authority-owned property at Bayport.
Financial operations continue to be solid, as evidenced by positive operating results in each of the past five years. Operating revenues are derived from three primary sources: vessel and cargo services (nearly 65% of 2003 total operating and non-operating revenues); equipment and facility rentals (9%); and bulk materials (2%). Led by a 36% rise in vessel and cargo revenues, operating revenues have increased by an average of nearly 7% annually since 1999. Operating revenues climbed by nearly 12% in 2003 to roughly $120 million, benefiting from increased traffic and higher local tariffs. Officials project operating results will exceed budget estimates in 2004, led by a resurgence in steel imports after the relaxation of federal tariffs in late 2003.
Property tax revenues constituted less than 20% of total revenues in 2003 and are used solely for debt service expenditures. The property tax levy for 2005 of $0.01673 per $100 taxable assessed valuation (TAV) is down modestly from 2004 and is at a recent low. The authority continues to maintain a very large amount of unrestricted cash and cash equivalents; the 2003 total was nearly $200 million, equal to more than 18 months of operating expenditures.
Existing bond authorization includes $25.7 million remaining from a 1989 authorization of $130 million for the ship channel dredging and $317 million remaining from a $387 million bond authorization approved in 1999 for the initial phase of the Bayport container terminal project. Due to its large tax base, the authority’s direct debt burden is a very low $86 per capita and about 0.2% of current TAV. The addition of $13.4 billion of debt from overlapping jurisdictions increases the authority’s overall debt ratios to an above-average $3,947 per capita and 7.2% of TAV.
The authority operates all public facilities of the Port of Houston and maintains the 50-mile ship channel. The Port of Houston ranks first among all U.S. ports in foreign tonnage and second in total tonnage. Fitch cites as the authority’s strengths its extensive facilities and related transportation network, location near the Gulf of Mexico, and proximity to the extensive economic base of the Houston metropolitan area. The authority’s tax base, which is coterminous with Harris County, continues to diversify with the top 10 taxpayers constituting only 7.4% of total values in 2003.
The area economy has broadened in recent years beyond its historical dependence on oil and gas, as reflected in significant job gains in services (including medical), manufacturing, and construction. NASA’s Johnson Space Center and the Texas Medical Center serve as major anchors to the local economy. The county’s employment base is expanding after a brief recessionary dip in 2002. The employment total for September 2004 of 1.8 million represented a 2% gain from the same period last year. Local unemployment rates have followed suit, declining from recent highs exceeding 7% to 6% in September 2004. While an improvement, this rate still exceeds the state and national averages of 5.4% for the month. In addition, wealth levels remain above average, with the rate of growth in per capita personal income outpacing both the state and the nation.