In addition, Fitch affirms the
The Rating Outlook is Stable.
The LRBs are secured by lease payments from the city to the authority for the use of various essential assets. The city has covenanted to budget and appropriate lease payments, subject to abatement, and payments can be made from any available funds of the city. The bonds do not include a debt service reserve.
KEY RATING DRIVERS
SOLID FINANCIAL PROFILE: The 'AA' implied GO rating reflects the city's good financial position, including sound reserve levels, structurally balanced operations, and early and full funding of the city's recently-instituted 16% reserve policy. However, policymakers will need to exercise spending restraint moving forward given anticipated pension and health care cost pressures.
ADEQUATE LEGAL PROVISIONS: The LRBs' one-notch distinction from the city's implied GO rating reflects the essential nature of the leased assets, overcollateralization, and adequate legal provisions including a covenant to budget and appropriate lease payments, two years of rental interruption insurance, and other standard insurance provisions.
CONTINUED ECONOMIC RECOVERY: The city's economic recovery continues, with rapidly recovering home prices, new residential and commercial construction, and rising employment. However, income levels are below state and national averages, and unemployment remains high despite recent improvements.
SOUND DEBT PROFILE: The city enjoys low net debt levels, an adequately funded pension system, minimal capital needs, and a small OPEB liability. However, debt amortization is slow and pension costs are expected to climb moving forward.
FINANCIAL OPERATIONS KEY: An unexpected and material deterioration of the city's financial position could lead to negative rating action. The Stable Outlook reflects Fitch's expectation that such a decline is not likely over the next review cycle.
The city of
The city's economic performance continues to improve from trough levels reached during the recession. The housing market has shown marked improvement, with increasing residential construction, and home prices up a substantial 19% year-over-year as of
The recovering housing market has helped stabilize the city's property tax base, which experienced a significant 10% peak to trough decline. The city's assessed valuation (AV) in fiscal 2013 was nearly flat and fiscal 2014 AV grew 3.2% to roughly
Although the city's economy continues to recover, its key economic data is somewhat weak. Unemployment registered a high 8.8% in
SOUND FINANCIAL POSITION AND MANAGEMENT PRACTICES
The city's financial position is solid, exhibited by sound general fund reserve levels and five consecutive years of structural balance. Management prudently initiated various expenditure reductions during the recession to offset declining revenues, including reducing the city's employee count and reforming its benefit programs. General fund operations in fiscal 2013 produced a
Estimated general fund results for fiscal 2014 include nearly balanced operations after consideration of a one-time bonus payment in lieu of a wage increase for the general fund's major bargaining units. The bonus cost to the general fund is approximately
The city maintains prudent financial management practices. Management produces multi-year financial projections, and recently the council adopted a sound minimum reserve policy of 16% of revenues and transfers in, divided evenly between economic and contingency reserves. The city's positive financial performance over the past two years enabled it to fully fund the 16% reserve minimum faster than Fitch had anticipated. Also, labor relations historically have been positive, and management is well tenured.
SOUND DEBT PROFILE
Net debt levels are low at just
The city's two pension plans, offered through CalPERS, have an adequate combined funded ratio of 79.1%. However, recent CalPERS actuarial adjustments are expected to result in significantly higher pension contribution rates over the coming years.
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 and Zillow.
--'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
- Doctor Who Christmas Episode Begins Production
- HCL America Adding 1,200 IT Jobs
- Medical Mfg. Jobs Coming to Dayton
- Michael Jackson, Freddie Mercury on Previously Unreleased Queen Cut
- Longtime Unemployed to Get Help in Las Vegas
- SpaceX Aims for Predawn Launch on Saturday
- Women Key to Democratic Party: Clinton
- U.S. Chamber Caught Up in Tax Inversion Question
- Feds Won't Say How Many Border Crossers Jailed
- Christie Didn't Order Bridge Shut Down, Feds Say