Fitch Ratings has assigned an 'AA+' rating to
In addition, Fitch has affirmed the following ratings:
The city's Issuer Default Rating (IDR) at '
Outstanding general obligation (GO) bonds at '
Outstanding LOBs at 'AA+'.
The Rating Outlook is Stable.
RATING ACTIONS
Entity / Debt
Rating
Prior
LT IDR
Affirmed
LT
Affirmed
LT
AA+
Affirmed
AA+
Page
of 1
VIEW ADDITIONAL RATING DETAILS
The series 2023A LOBs are scheduled for a negotiated sale on or about
SECURITY
The GO bonds are payable by the city's full faith, credit and unlimited taxing power.
The city's LOBs are payable from installment payments made by the city, equal to debt service, subject to annual appropriation. The bonds are also backed by a deed of trust on certain governmental facilities.
ANALYTICAL CONCLUSION
The '
The 'AA+' rating on the LOBs is one notch lower than the city's IDR and GO rating, reflecting the lesser long-term commitment to repayment, principally evidenced by the city's obligation to annually appropriate installment payments. Various governmental assets are subject to the LOB deed of trust and are subject to surrender by the city should it fail to make an installment payment.
Economic
KEY RATING DRIVERS
Revenue Framework: 'aaa'
Revenues are primarily derived from property tax revenues, for which the city retains considerable revenue raising ability with current tax rates well below the statutory limit. Fitch expects natural revenue growth absent policy action to outpace long-term expectations for national inflation supported by continued development, property appreciation and population gains.
Expenditure Framework: 'aa'
Expenditures are expected to increase marginally above revenue growth trends without policy changes due to increased services with an expanding population. Carrying costs are moderate with above average debt amortization, however the city's ability to control labor and benefits provides significant spending flexibility in the absence of collective bargaining.
Long-Term Liability Burden: 'aaa'
The city's long-term liability burden, composed of overall debt and net pension liabilities, is expected to remain moderately low relative to personal income, due to manageable debt issuance plans and continued economic growth. Pension liabilities are a modest component of the overall liability burden.
Operating Performance: 'aaa'
The city maintains very strong gap-closing capacity strengthened by its superior inherent budget flexibility, reflecting its high revenue raising authority and solid expenditure flexibility. Prudent budget management has contributed to the consistent maintenance of healthy reserve levels and positions the city to manage well throughout economic cycles.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Not applicable as the IDR is rated '
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A sustained increase in fixed-cost spending associated with debt service and employee retirement benefits to level that is notably greater than 20% of total governmental expenditures, contributing to a reduction in overall expenditure flexibility;
An increase in the long-term liability burden to a level sustained above 10% of personal income, due to a combination of additional debt issuance or changes in net pension liabilities, without a commensurate rise in personal income.
Best/Worst Case Rating Scenario
International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
CURRENT DEVELOPMENTS
The city has consistently maintained a strong financial position. The city ended fiscal 2022 (
Revenues (excluding transfers) outperformed the budget by
The fiscal 2023
Based on year-to-date results, the city is projecting a
CREDIT PROFILE
Economic
Business enterprises in
Development projects have continued on a robust pace since the pandemic, with several development projects underway and planned, including redevelopment of the downtown riverfront area with mixed use projects, hotels, apartments, streets, sidewalks and park improvements. Continued infrastructure improvements and expansions at the
Revenue Framework
The city benefits from a stable and diverse revenue stream, with property and sales tax revenues accounting for roughly 52% and 30% of fiscal 2022 general fund revenues, respectively. Sales tax revenues were not negatively affected by the coronavirus pandemic and related economic slow-down, benefitting from the
The city's adjusted general fund revenue growth modestly exceeded the national GDP for the 10-year period ending fiscal 2022, although Fitch considers this to be somewhat overstated due to the city's receipt of
The city's most recent property revaluation resulted in an estimated 40% increase in total assessed values for fiscal 2022 (revaluations occur every four years; prior revaluation occurred in 2018). Fitch believes the city's prospects for future revenue growth are solid, benefitting from population gains, development and property appreciation.
The city maintains ample capacity to raise revenues, with the fiscal 2023 tax rate of
Expenditure Framework
The city provides a broad range of municipal services, including public safety, transportation, public improvements, culture and recreation. Public safety is the leading expenditure category, accounting for 49% of fiscal 2022 general fund expenditures.
Fitch expects the pace of spending will generally align with revenue growth, absent policy action, as increase in demand driven by the city's population gains should be met with similar tax base and revenue expansion.
Fitch views the city's expenditure flexibility to be solid. Carrying costs, composed of debt service, pension and OPEB contributions, were a moderately high 19% of fiscal 2022 governmental spending. Carrying costs are mostly composed of debt service, and Fitch expects them to remain generally stable given the city's capital funding strategy to dedicate a portion of its property tax rate to fund various capital projects, utilizing 80% of the dedicated tax rate to pay debt service and 20% for pay-go capital spending. Additional flexibility is derived from its independent legal control over workforce costs in the absence of collective bargaining.
Long-Term Liability Burden
Fitch estimates the city's long-term liability burden, composed largely of direct city debt and the overlapping debt obligations of
The majority of city employees participate in the statewide Local Government Employees Retirement System, a cost-sharing multiple employer plan with a ratio of assets to liabilities of 96%, or 90% using a Fitch adjusted 6% investment rate of return. Law enforcement officers receive additional pension benefits from a city administered single employer defined benefit plan. The combined ratio of pension assets to liabilities in fiscal 2022 was 89%, or 85% on a Fitch-adjusted basis; the combined net pension liability at year-end totaled
The city provides other post-employment benefits (OPEB) to employees hired before
Operating Performance
The city benefits from substantial gap-closing ability due to significant inherent budget flexibility and consistent maintenance of healthy level of reserves. The city has demonstrated solid management throughout economic cycles and Fitch believes the city would continue to budget conservatively and make the necessary expenditure reductions to maintain a satisfactory level of financial flexibility.
The city consistently demonstrates prudent financial management and conservative budgeting, positioning it to manage well throughout economic cycles. The city's general fund balance policy requires a minimum unassigned fund balance equal to 20%-25% of the current operating budget (revised from 15%-20% in fiscal 2018). Fitch anticipates reserve balances will remain healthy and that the city will take various budgetary actions to maintain compliance with its policy standard.
In addition to the sources of information identified in Fitch's applicable criteria specified below, this action was informed by information from
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
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