--Implied unlimited tax general obligation at 'AAA'.
The Rating Outlook is Stable.
The certificates are secured by a standard lease-leaseback arrangement between the city and the
KEY RATING DRIVERS
ABOVE-AVERAGE ECONOMY: Economic characteristics have remained strong, demonstrated by low unemployment, very high wealth levels, stable housing market, and resilient overall tax base. Fitch believes modest in-fill development and the rebounding real estate market may drive tax base growth over the next several years.
STRONG FINANCIAL PROFILE: Prudent financial management has resulted in a history of positive operations, augmenting the city's very high reserves, despite large planned general fund investment in capital projects. Management has successfully implemented expenditure savings, including major labor concessions and the use of contracted services.
LOW DEBT, CARRYING COSTS: The city's total debt burden is low and likely to remain so given limited near-term capital needs. Amortization is average and the city has reduced retiree health care costs, though pension contributions are expected to rise. Carrying costs, including debt service and retiree benefit contributions, remain affordable.
SOUND LEASE STRUCTURE: The 'AA+' COP rating reflects a solid legal structure which includes essential leased assets, standard insurance provisions and a city covenant to budget and appropriate gross lease payments without consideration of the Build America Bonds subsidy, offset in part by the lack of a debt service reserve fund.
The rating is sensitive to shifts in fundamental credit characteristics including the city's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
DIVERSE AND AFFLUENT LOCAL ECONOMY
The economy benefits from the city's mature, wealthy tax base and strong employment among financial and insurance firms, as well as retail shopping and tourism activity. Home values are among the highest in the country and, according to Zillow, currently match their 2007 peak. Overall assessed valuation (AV) has been stable despite the economic downturn, with growth in each of the last five years. City AV increased a strong 5.2% for fiscal 2014 reflecting continued development activity and residential value stabilization, though future growth is expected to taper off as AV returns to the historical trend.
Local unemployment remains exceptionally low, at 3.0%, less than half the state (7.1%) and national (6.1%) averages. Per capita income levels are nearly three times national, state and regional averages. The city's population showed strong growth over the last decade, moderating in recent years. Population is expected to remain steady as the area is built out, dampening prospects for new development and population growth.
SUPERIOR FINANCIAL MANAGEMENT
The city's robust resource base helps support its consistently strong financial position. Financial operations produced net surpluses (after transfers) in five of the last six fiscal years, bolstering the city's strong fund balances. The city achieved a surplus of
Financial operations continue to benefit from stable and growing property tax revenues (48% of fiscal 2013 revenues), and rebounding sales tax revenues (12%), which have performed better than budgeted, approximating pre-recessionary levels in fiscal 2013. Total revenues have grown for the last three consecutive years following their fiscal 2010 trough. Management prudently implemented expenditure reductions to mitigate recessionary declines, augmenting operating performance in the improved revenue environment.
Expenditure controls to date have been moderate, including early retirement incentive plans, increased employee contributions to pension plans, contracting services, and freezing vacant positions. Conservative general fund projections for fiscal 2014 indicate a small use of
Financial management policies are robust and continue to improve to meet the city's financial needs. They include a contingency reserve equal to 25% of the general fund operating budget, up from 15% at the time of Fitch's last review. The city has also implemented a new debt policy, effective this year. The policy addresses specific purposes, forms, and levels of debt, as well as the procedure the city will take in the event of future borrowing.
MANAGEABLE DEBT AND CARRYING COSTS
Per capita debt is high at
The city's other post-employment benefit (OPEB) plan is partially pre-funded and contributions are affordable. The city participates in the
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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