--Implied general obligation (GO) bond rating at 'AA+'.
The Rating Outlook is Stable.
The bonds are secured by lease payments from the city to the authority for use of a police station, subject to abatement. The lease includes covenants to budget and appropriate, maintain casualty insurance, two years of rental interruption insurance, and a debt service reserve. The reserve is cash-funded at
KEY RATING DRIVERS
SOUND FINANCIAL OPERATIONS: The 'AA+' implied GO rating reflects the city's strong financial profile, characterized by a large financial cushion, surplus operations in fiscal years 2010-2013, pension reforms, and reservation of funds to begin paying down the city's modest other post-employment benefits (OPEB) liability.
EMPHASIS ON EXPENDITURE CONTROL: Despite a small projected general fund drawdown in fiscal 2014, the city has demonstrated strong expenditure control, particularly with regard to its labor costs and service restorations. Fitch expects such expenditure control will allow the city to avoid conservatively projected structural imbalance going forward.
MATURE, DIVERSE ECONOMY AND TAX BASE: The city's mature economy includes significant education, governmental, tourism, service industry, and technology employers. The city's tax base is also well diversified and demonstrated considerable resilience during the recession.
SOUND DEBT PROFILE: The city's debt levels are moderate, its carrying costs are affordable, capital needs are manageable, and debt amortizes swiftly.
The rating is sensitive to shifts in fundamental credit characteristics including the city's strong financial management practices and emphasis on expenditure control. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
The city of
SOUND FINANCIAL OPERATIONS, STRONG EXPENDITURE CONTROL
The city ended fiscal 2013 with a high unrestricted general fund balance of
The city's conservatively budgeted multiyear projections indicate a small structural imbalance through fiscal 2018. Based on the city's strong history of expenditure control (particularly with regard to managing its labor costs and conservatively restoring services) and budgetary outperformance, Fitch expects that the city will be able to solve this structural imbalance easily on an annual basis, particularly given likely general fund revenue growth.
As an example of the city's fiscal conservatism, all current labor agreements were negotiated on the basis that remuneration increases are one-time and, at the end of the labor agreement terms, revert back to pre-
MATURE, DIVERSE ECONOMY AND TAX BASE
Assessed value (AV) held up well during the recession, reflecting the community's maturity. AV fell by just 0.2% in fiscal 2010, rebounding each year thereafter apart from another tiny 0.2% decline in fiscal 2012. While there are limited new development opportunities within the built-out city besides in-fill and redevelopment activity, a new hotel is under construction and three others are in the active planning stage. The top 10 property taxpayers made up just 4.9% of fiscal 2013 AV and were primarily tourism- and hotel-related.
SOUND DEBT PROFILE
The city's overall debt burden is moderate at
The city's fiscal 2013 carrying costs for annual debt service, annually required pension contributions, and pay-as-you-go OPEB contributions were an affordable 15.2% of total governmental spending in fiscal 2013. Fitch expects carrying costs to remain affordable in the future, despite rising pension contribution costs.
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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