USA — Central Texas Wildfires Have No Immediate Ratings Impact
Standard &Poor’s Ratings Services said today that the wildfires that have been burning in Central Texas for the past month will not have an immediate effect on the following general obligation ratings: Bastrop County (AA-/Stable); City of Bastrop (A+/Stable); Bastrop Independent School District (A+/Stable); and Travis County Water Control &Improvement District No. 17-Steiner Ranch (A/Stable).
On Sept. 4, a wildfire began six miles northeast of the city of Bastrop. It eventually spread to encompass over 34,000 acres. More than 1,500 homes have been destroyed, with preliminary insured-loss estimates as high as $250 million.
We expect that most structures lost to the fire will be rebuilt, and that much of the rebuilding costs of the municipalities will be reimbursed by the Federal Emergency Management Agency and the state. Although the fire-related damage thus far is significant, it does not yet appear, based on what we know, that any individual entities have been strained to the point of immediate credit concern given what we consider to be the strong financial position of each of the rated entities.
We will monitor the impact on local revenues, and ultimately the resulting change in general fund and overall liquidity levels. As is often the case during periods of reconstruction, we expect that sales tax collections are likely to increase over the near term as rebuilding efforts get underway. However, significant declines in assessed valuation (AV) due to property destruction could impact property tax-related revenues until properties are rebuilt. While the city of Bastrop derives approximately 21% of its revenues from property taxes, we believe that the impact is more likely to be felt by the county and school district, since property tax revenues accounted for 58% and 46% of fiscal 2010 general fund revenues, respectively. In addition, we believe it is possible that Bastrop County could ask for a reappraisal of the damaged properties, which could potentially reduce the AV and impact property tax revenues. Worst-case scenarios provided by the Bastrop County Appraisal District indicate that the fires could have caused up to $371 million in damage, or roughly 12% of the total AV. We do not anticipate a significant decline in property tax revenues for Travis WCID #17 (Steiner Ranch); out of roughly 4,000 homes in the district, 24 were destroyed and 30 were damaged.
At this point, Standard &Poor’s will not change the ratings or outlooks of any of the rated municipalities affected by the fire until the true extent of the economic and financial impact on the issuers is ascertained.