The bonds are expected to sell on
In addition, Fitch affirms the following ratings:
The Rating Outlook is Stable.
The ULTGOs are general obligations of the city to which its full faith and credit and unlimited taxing power are pledged.
The LOBs series 2012A represent an absolute and unconditional contractual obligation of the city, not subject to annual appropriation.
The remaining COPs and LOBs are secured by lease payments, subject to annual appropriation, and a deed of trust against certain essential and nonessential governmental assets of the city. A one-notch rating distinction from the ULTGO rating is made for the obligations with a security interest in essential governmental assets, and a two-notch distinction for nonessential assets.
The special obligation bonds are secured by a portion of the city's sales and use taxes.
KEY RATING DRIVERS
HEALTHY FINANCIAL FLEXIBILITY: Robust reserves are buttressed by a liquid balance sheet. Financial management is strong, and budgeting practices are conservative.
SOUND ECONOMIC PROFILE: The city is a regional hub for health care, higher education, and biotechnology, which add diversification from its traditional manufacturing concentration. Economic indicators trend slightly below state and national averages.
MANAGEABLE DEBT BURDEN: Overall debt levels are moderate, and principal payout is rapid. Costs related to debt service and retirement benefits consume a manageable share of annual spending.
'AAA' LOBs: Lease payments on the 'AAA'-rated LOBs are not subject to appropriation; they represent an absolute and unconditional obligation of the city payable from its general fund, and the city may levy taxes to meet its payment obligation subject to statutory limitations. There is ample margin under this limitation.
SPECIAL OBLIGATION RATING: The 'AAA' rating on the special obligation bonds reflects the exceptional coverage provided by pledged sales tax revenues at 7.2 times (x) in fiscal 2013.
LOBS WITH APPROPRIATION RISK: The rating assigned to the other LOBs reflects appropriation risk in addition to the level of essentiality of the assets securing bondholder repayment.
MAINTENANCE OF STRONG RESERVES: The rating is sensitive to shifts in fundamental credit characteristics including the city's strong financial management practices. The 'AAA' GO rating and Stable Outlook reflect Fitch's expectation that such shifts are unlikely.
MAINTENANCE OF STRONG RESERVES, HIGH LIQUIDITY
Reserve and liquidity levels remain ample, reflecting the city's strong financial position. For fiscal 2013, the general fund's unrestricted fund balance was
The city has remained in compliance with its prudent unassigned fund balance policy of 12.5% of estimated general fund expenditures. The city had operating surpluses in each of the past four fiscal years, with general fund balance growing from
FISCAL 2014 BUDGET AND PROJECTIONS
The fiscal 2014 budget includes a
The city is projecting to close the year with better than budget operations. The projected year-end operating results reflect a
The proposed fiscal 2015 budget includes a
CONTINUED DIVERSIFICATION OF LOCAL ECONOMY
Healthcare services, biotechnology, and higher education drive the local economy.
Manufacturing plays a significant role in the economy even though it is no longer the city's primary source of jobs. Among the larger taxpayers is Reynolds American Inc., whose headquarters are in the city, but closed its last manufacturing plant during 2012.
MIXED ECONOMIC INDICATORS, BUT DOWNTOWN DEVELOPMENT HOLDS PROMISE
Economic indicators for the city are mixed. The city's
Taxable values have seen some fluctuation in recent years, but are essentially flat from the fiscal 2008 level. The city is now seeing a resurgence of downtown development, including several multi-family and mixed use development projects. The recent sale of a historic RJ Reynolds building to a developer planning a hotel/apartment conversion continues that trend.
MODERATE DEBT LEVELS, MANAGEABLE CARRYING COSTS
Overall debt levels are moderate (
Historically, the city has issued variable-rate debt for short-term equipment deals. Variable-rate debt outstanding totals a manageable
Fiscal 2013 carrying costs related to debt service and retirement benefits were a sizable 23.6% of governmental spending. General employees are members of the North Carolina Local Government Employees' Retirement System (NCLGERS), and police officers are members of the city's
OPEB liabilities do not represent a significant cost pressure. At the close of fiscal 2013 the UAAL was reported at
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' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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