In addition, Fitch affirms the following ratings:
--Implied general obligation at 'AA+'.
The Rating Outlook is Stable.
The COPs are secured by lease rental payments made by the city for use of the civic center and are subject to annual appropriation and abatement.
KEY RATING DRIVERS
RESOLVING STRUCTURAL IMBALANCE; SOUND RESERVES: The city continues to conservatively manage operations to maintain consistently solid general fund reserves and liquidity. Ongoing labor concessions and other expenditure cuts, coupled with improved revenues and voter-approved revenue enhancements have been largely effective in closing the gap.
STRONG REGIONAL ECONOMY PROVIDES DIVERSITY: The local economy benefits from the broader
WELL-MANAGED LIABILITY BURDEN: Overall debt levels are moderately low with currently manageable carrying costs, and capital plans include modest future borrowing. Rising pension costs have the potential to pressure the credit, though this is somewhat mitigated by management's successful negotiation of pension cost sharing among all employees.
LEASE REVENUE COPs: The one-notch rating distinction on the lease revenue COPs reflects the city's general credit quality as well as covenant to budget and appropriate sufficiently for lease rental payments, a requirement for rental interruption insurance, and the use of essential city property as security.
FAILURE TO MAINTAIN STRUCTURAL BALANCE: Failure to maintain structural balance would indicate pressured financial flexibility inconsistent with the current rating, given the city's limited level of expenditure flexibility.
DETERIORATION OF RESERVES: Near-term fund balance use above current projections could compromise the city's currently ample financial flexibility.
The city is located in
STABILIZING STRUCTURAL BALANCE; CHALLENGES REMAIN
The city's financial operations have stabilized in recent years, with prudent management offsetting budgetary imbalances. Voter-approved revenue increases have supplemented conservative revenue forecasting and substantial expenditure reductions to allow the city to maintain solid reserves. The city's liquidity position is consistently healthy, with general fund cash exceeding liabilities by approximately four times for at least the past five fiscal years.
The city's fiscal 2013 unrestricted fund balance of
The city has actively managed operations to maintain balance, despite ongoing challenges. Total city revenues have increased since the economic downturn, with revenue enhancements and prudent cost controls offsetting property and sales tax declines. The city successfully implemented voter-approved utility user tax and sales tax increases along with stringent negotiated cost-sharing for employee pension liabilities.
The fiscal 2014 budget calls for a use of
Management expressed commitment to maintain balanced fiscal 2015 operations despite projections for continued budget deficits. The city and its employees have agreed upon stringent cost containment measures, including negotiated cost-sharing for employee pension liabilities, in response to projected budget imbalances. Management stated that service cuts would be considered to achieve balance; however, Fitch considers the city's level of expenditure flexibility to be limited, given the city's high level of public safety spending.
VOTER-APPROVED REVENUE INCREASES
The city secured voter approval for a twenty year half-cent sales tax measure which is projected to augment general fund revenues by approximately
Current budget plans call for a
BROAD REGIONAL EMPLOYMENT OPPORTUNITIES, NARROW LOCAL COMMERCIAL BASE
The city is located 14 miles south of
The city has largely recovered from the economic downturn, with both housing prices and assessed value showing strong growth in recent years, increasing the city's tax base by 13% since fiscal 2012. With 10% growth in fiscal 2014, taxable assessed value now exceeds the fiscal 2009 level. The
LIMITED DEBT PRESSURES
Overall debt ratios are moderately low at
Rising pension costs have the potential to pressure the credit. Substantially all city employees participate in the
Near term cost growth is contained as a result of the city's reduced workforce and negotiated cost sharing measures. Pension costs will increase by a relatively modest
The city's OPEB contribution was a modest 1.4% of governmental fund spending in fiscal 2013, with full ARC funding by fiscal 2019 incorporated into the fiscal 2015 budget. Total carrying costs, including debt service, pension ARC, and OPEB contributions, equaled a low 12.67% of governmental fund spending in fiscal 2013, despite the city's rapid principal amortization rate and pension cost increases.
TYPICAL LEASE STRUCTURE
The city has covenanted to budget and appropriate lease rental payments for the use of the civic center, home to the city's primary municipal function and city council chambers. The city may substitute other property for the leased civic center, although the substituted property must have comparable appraised value, essentiality, and useful life.
The lease requires the city to provide rental interruption insurance equal to at least the maximum payment payable in any two consecutive fiscal years in the remaining term of the lease. Lease payments would be abated proportionately during any period where there is substantial interference with the city's use and occupancy of the property, although not if insurance proceeds or reserve fund amounts are available to pay the lease. The city waives its right to terminate the lease in the event of damage or destruction.
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
Most Popular Stories
- James Foley Beheading Video Is Real Thing: White House
- McDonald's Packages Coffee for National Distribution
- Apple Stock Bounces Back Big Time
- Honda's Safe Approach Pays Off in Sales
- Castro-Blanco Joins Fifth Street Finance Board
- GE Healthcare Bringing Jobs to Massachusetts
- Notes From the July FOMC Meeting
- Target Slashes Annual Profit Outlook
- Ballmer Steps Down From Microsoft Board
- Google Kid Accounts Plan Raises Worries