The BANs and bonds are scheduled to sell competitively on
In addition, Fitch affirms the following ratings on the city's outstanding GO bonds and BANs listed below:
--14 million, GO bonds, series 2009, at 'A+';
The Rating Outlook is Stable.
The bonds and notes are a full faith and credit obligation of the city backed by its unlimited taxing power.
KEY RATING DRIVERS
NARROW RESERVES LIMITS FLEXIBILITY: Reserve levels are currently slim and while the city has a plan in place to rebuild reserves to more robust levels, management will be challenged to do so as fixed costs rise and the economic recovery lags. However, Fitch expects the city to continue to appropriate increases to reserves.
MANAGEABLE LONG-TERM LIABILITIES: The city's overall debt levels are moderate and should remain affordable given the above-average principal amortization and the city's modest debt issuance plans. Pensions are well funded and total pension, debt and OPEB carrying costs are not burdensome.
WEAK DEMOGRAPHICS/DIVERSE ECONOMY: The unemployment rate remains elevated and economic indicators are below average, evidenced by weak income levels. However, the presence of health care and higher education institutions lend stability and diversity to the economy. Defense-related employment remains important to the local economy and has not been materially affected by federal budget cuts.
FUTURE MARKET ACCESS: The 'F1+' short term rating on the BANs reflects the city's overall credit characteristics, and unlimited taxing powers.
MAINTENANCE OF ADEQUATE LIQUIDITY/RESERVES: The city is focused on rebuilding its reserve and liquidity balances and Fitch expects the city to comply with its ordinance requiring annual contributions. Any reversal in this plan could result in negative rating pressure.
STRUCTURAL IMBALANCE CAUSED DECLINE IN RESERVES
Large general fund operating deficits in fiscal years 2011 and 2012 significantly reduced the city's financial flexibility. The 2012 deficit was due to optimistic revenue assumptions particularly in property tax collections and state aid and overspending by fire and public works departments. The fiscal 2012 unrestricted general fund balance of
During fiscal 2012, under the new, strong-mayor form of government, management took remedial action to cut spending, including implementation of layoffs. As a result of these cuts and a 5.1% tax increase (
City council approved a 3.4% tax increase as part of its fiscal 2014 budget. The budget failed to be approved on the first submission and was revised and ultimately approved by the city's council with a 2.9% tax rate increase. The city is projecting it is on target with budgeted operations for fiscal 2014. In addition, a
The city's revenues consist primarily of property taxes and state aid for education. State aid revenues as a percentage of the budget are declining but still represent 41% of total general fund revenues, leaving the city exposed to state aid volatility. As a result rebuilding reserves are key to maintaining credit quality.
The mayor's fiscal 2015 budget includes a
DIVERSIFIED ECONOMY WITH SIGNS OF DEVELOPMENT
Over the last 20 years the local economy has diversified away from a heavy reliance on defense-related employment with expansion in the service-related sectors. In addition, the presence of health care and higher education institutions lend stability to the economy. Major employers include
In 2010, Pfizer consolidated and relocated its research group from the city to its facility in
BELOW-AVERAGE SOCIOECONOMIC INDICATORS
MANAGEABLE LONG-TERM LIABILITIES
Debt levels are moderate, with net overall debt equal to
Fitch believes the credit quality of the BANs is enhanced by the GO pledge securing the notes and the city's history of ready market access.
The city administers a contributory and non-contributory single-employer pension plan. The non-contributory plan has been closed and city contributions of
The city has pension plans for firefighters and certain other employees, with fiscal 2013 contributions of
The city's unfunded OPEB liability was a moderate
Total carrying costs for debt service, pension and OPEB pay-go of
Additional information is available at 'www.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' (
--'Rating U.S. Municipal Short-Term Debt' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
Most Popular Stories
- National Retail Federation Reduces Sales Forecast
- Xavier Gutierrez Appointed to Bank Board
- Long-term Strengths Emerge in U.S. Economy
- Hispanic Leader Goes the Extra Mile
- Honda' s Accord Plug-in Hybrid Is a Fuel Miser
- Weekly Jobless Claims Drop to Lowest Level in 8 Years
- Naya Rivera and Ryan Dorsey Are Married
- Menendez: No Arms for Iraq Without Intel
- Self-Induced Abortions Rise After Texas Closes Clinics
- Amazon Fire Phone Improves on Familiar: Review