The Rating Outlook is Stable.
The certificates are valid and legally binding direct obligations of the library payable from any funds of the library legally available for such purpose. The library agrees to appropriate funds annually and in a timely manner as to provide for the making of all payments due under the terms of the certificates. The library does not have taxing power.
KEY RATING DRIVERS
LIBRARY, CITY STRONGLY LINKED: The 'A-' rating reflects the library's exposure to the below-average credit fundamentals of the city of
RELIANCE UPON ONE-SHOTS: City general fund operations are reliant upon non-recurring sources for operating and liquidity support; however, the FY15 budget shows progress toward structural balance. Financial reporting has improved markedly after years of late audits.
CONTINUED ECONOMIC CHALLENGES: Assessed valuation continues to decline at a rapid pace. Further, the local economy is challenged by above-average unemployment rates and below-average wealth levels.
MODERATE DEBT; HIGH COSTS: The city's and the library's aggregate debt burden is moderate and future capital needs are manageable. The city's fixed cost burden for long-term liabilities is high at almost 30% in 2013, partially attributable to very rapid amortization.
POOR PENSION FUNDING: The city and library's pensions are underfunded, which will pressure future budgets. Pensions are being funded to the statutory minimum, below the actuarially-based annual required contribution (ARC).
ECONOMIC STABILIZATION: The rating assumes continued economic challenges. Continued large declines in the tax base would likely put downward pressure on the rating.
FINANCIAL PERFORMANCE: The city and library's financial performance is critical to the rating. Inability of the city to demonstrate progress toward structural balance may cause downward rating pressure.
The library, coterminous with and a component unit of the city of
LIBRARY IS FINANCIALLY DEPENDENT ON CITY
The library is closely linked to the city's financial position and dependent on the city for levying its property taxes. Fitch considers as a credit positive the library's strong working relationship with the city, which consistently levies a substantially higher dedicated millage (.407 mills in 2015) than the .15 required by state statute. The library is highly dependent on property taxes; this source represents 89% of revenues in fiscal 2015 budget.
CITY CLOSER TO STRUCTURAL BALANCE
The city's finances remain structurally imbalanced, but have improved after years of financial challenges, with stronger budget-to-actual results, and on-time reporting for fiscal 2013. The city recorded break-even operations in FY13, although would have experienced a deficit absent a large transfer from the utility fund, sized to cover this shortfall.
Fiscal 2013 ending general fund balance was 26.6% of spending (
The city's home rule status confers considerable revenue flexibility, demonstrated by the instating of a food and beverage tax in 2011 and a 1/4-cent sales tax to be collected in 2015 for capital projects.
The 2015 budget eliminates the practice of ongoing utility support for general operations and failure to achieve this could be a credit concern. While the 2015 budget is balanced, Fitch notes that some outyear pressure may result from grant-funded public safety positions, grants for which terminate in 2016. Fitch expects that stepped up public safety pension costs in FY16 will be offset by increases in the city's dedicated pension levies.
LIBRARY RESERVES PARTIALLY MITIGATE EXPOSURE TO CITY
The library's strong relationship with the city and prudent fiscal policies resulted in a strong fiscal 2013 unreserved fund balance at 48.5% of spending (
The library's 2015 budget continues the trend of strong city support with 3% growth in the city's library levy and incorporates a small operating surplus. Cuts in hours have been partially restored. The budget includes
WEAK ECONOMIC INDICATORS; CONTINUED AV DECLINES
The city's unemployment rate was notably elevated at 9.6% in
MODERATE DEBT; POOR PENSION FUNDING
Fitch does not expect that debt payments will represent near- or medium-term financial pressure for the library, as overall debt is moderate (
Fitch expects that the city's and library's annual pension payments will likely increase given that the state plan to which they contribute is underfunded (estimated at 61% as of
Other post-employment benefits (OPEB) are limited to an implicit rate subsidy, which is not presented separately for the library from the city's financial reporting. The city's unfunded OPEB actuarially accrued liability is
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' (
U.S. Local Government Tax-Supported Rating Criteria
Tax-Supported Rating Criteria
Source: Fitch Ratings
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