Fitch Ratings has affirmed the following --
In addition, Fitch has affirmed the following
--Implied general obligation (GO) bond rating at 'AAA'.
The Rating Outlook is Stable.
The lease revenue bonds are secured by the city's lease rental payments to the authority for use of various facilities, subject to abatement. The city covenants to budget and appropriate the full annual lease rental payment amounts.
KEY RATING DRIVERS
STRONG ECONOMIC FUNDAMENTALS: The city's tax structure successfully captures much of the economic activity generated by a strong and mature economic base that includes particularly prominent retail and hotel businesses.
SOLID FINANCIAL OPERATIONS: The city's financial position is characterized by thorough financial management, solid financial reserves, an affordable debt burden, and a focus on reducing pension and other post-employment benefit (OPEB) liabilities.
SOME REVENUE EXPOSURE: Although two of the city's main revenue sources, sales and transient occupancy taxes (i.e. hotels), are particularly sensitive to economic downturns, the city has demonstrated successfully that it balances revenues and expenditures to ensure continued positive operations.
STRONG TAX BASE: Although there are significant constraints on new development within the largely built-out city, taxable assessed valuation (TAV) is growing well and new development is underway.
FAVORABLE LEASE-RATING FACTORS: The 'AA+' lease rating reflects the factors above as well as all lease transactions' strong legal structures. Lease features include the city's covenant to budget and appropriate sufficiently for lease rental payments, and a requirement for rental interruption insurance.
CHANGE IN FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics including the city's strong financial performance, economy, and tax base. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
STRONG ECONOMIC FUNDAMENTALS
The city is a mature, stable, and wealthy community covering a small 5.7 square miles. It is almost entirely developed, with limited potential for redevelopment. The major taxpayers are office, retail, and high-end hotel owners. While the resident population is approximately 35,000, workers and visitors raise the daytime population by more than 100,000. Income levels are very high with a median household income 1.6x that of the nation's and per capita money income 2.7x. The city's unemployment rate declined to 6.5 percent in
After a small TAV decline of 2.6 percent in fiscal 2011, there has been a cumulative 10.9 percent increase between fiscal years 2012 and 2014. Taxable value is exceptionally high, at approximately
SOLID FINANCIAL OPERATIONS
City finances benefit from a diverse revenue stream with four particularly significant sources of operating support: sales, hotel, property, and business taxes (cumulatively 78 percent of fiscal 2013 general fund revenues). Because of sales and hotel taxes' sensitivity to economic downturns, the city had to implement significant expenditure reductions during fiscal years 2010-2012. As a result, the city was able to consistently maintain positive operations throughout the recession.
The city ended fiscal 2012 with a high total general fund balance of
The city maintains sizable financial reserves. In addition to its very strong unrestricted general fund balance, the city could borrow from the majority of its
AFFORDABLE DEBT BURDEN
As a result of its disproportionately productive commercial sector, small geographic size and population, and very high property values,
The city regularly makes its annual actuarially required pension contributions to CalPERS. The city's pension obligations are moderately well funded at 78 percent using Fitch's more conservative 7 percent discount rate. Following labor negotiations and subsequent California Public Employees' Pension Reform Act of 2013 reforms, the city now has two additional pension tiers providing less expensive benefits and employees share more of the pension system's costs. The city has worked to limit its OPEB liabilities to the point where
The city's fiscal 2013 debt service, actuarially required pension contribution, and OPEB pay-as-you-go costs represented a very manageable 15.3 percent of its total governmental spending that year.
Additional information is available at 'fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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Fitch Ratings has affirmed the following