Fitch assigns an 'A+' rating to $121.2 million Oakland
Joint Powers Financing Authority revenue bonds, series 2005 (City of
Oakland general obligation bond program). The bonds are scheduled to
sell via negotiation with M.R. Beal & Company and Banc of America
Securities LLC and on or about June 2. The Rating Outlook is Stable.
In addition, Fitch affirms the 'A+' rating on the City of Oakland's
general obligation bonds, also with a Stable Rating Outlook.
The 'A+' rating is based on the City of Oakland's general obligation pledge, which secures underlying bonds ($122.4 million in general obligation refunding bonds) that will be purchased by the Oakland Joint Powers Financing Authority (the authority) with the revenue bonds proceeds. The city's payments are transferred to the bond trustee through a sound legal structure. Oakland's general obligation rating is based on Oakland's stable economy and generally satisfactory financial operations.
As the urban core of the San Francisco Bay Area's East Bay, Oakland is a major commercial and trade center and includes one of the West Coast's busiest ports. It is California's eighth largest city, with around 412,000 residents. As with most other Bay Area communities, the national and regional economic weakness has resulted in job losses and significant increases in unemployment levels over the past four years. However, recent unemployment data indicate an improvement with the March 2005 unemployment rate plummeting to 7.9% from its 10.2% level one year ago. The current level remains high, which has been characteristic for Oakland. Meanwhile, the city's assessed values have posted impressive gains, averaging 8.1% per year since fiscal 1999 and including a strong 8.1% rise in fiscal 2005. Ongoing construction and strong building permit activity suggest that assessed value will continue to rise. New businesses and residents will continue to be attracted by more affordable land, office space, and general cost of living than much of the region. Similarly, income levels remain below county, state, and national averages.
The city's financial position remains stable due to substantial expenditure reductions and revenue enhancements. While the city experienced two consecutive years of operating surpluses, which helped replenish fund balances, a drawdown led to a decline in the unreserved fund balance to $48.6 million, a still healthy 9.8% of operating expenditure by fiscal 2004's year end. Although below earlier levels, fund balances remain adequate due largely to the city's adoption of substantial budget cuts to offset rising personnel costs.
Fitch notes a sizable $268.6 million unfunded actuarial accrued liability in the city's closed Police and Fire Retirement System (PFRS), as well as city efforts to date to address it. As a result of a funding agreement between the PFRS board and the city following a pension obligation bond issue in 1997, the city is not required to make any contributions through fiscal 2011. However, beginning in fiscal 2012, the actuary expects the city payment to be $41 million, a significant figure relative to the city's operating budget.
Oakland is beginning to proactively manage this upcoming cost by establishing a stabilization fund to collect excess property tax payments levied solely for the PFRS system and to voluntarily contribute funds later this year. While noting the city's recent prudent actions, Fitch will continue to monitor continuation of efforts to moderate the PFRS long-term budget implications.
The 'A+' rating is based on the City of Oakland's general obligation pledge, which secures underlying bonds ($122.4 million in general obligation refunding bonds) that will be purchased by the Oakland Joint Powers Financing Authority (the authority) with the revenue bonds proceeds. The city's payments are transferred to the bond trustee through a sound legal structure. Oakland's general obligation rating is based on Oakland's stable economy and generally satisfactory financial operations.
As the urban core of the San Francisco Bay Area's East Bay, Oakland is a major commercial and trade center and includes one of the West Coast's busiest ports. It is California's eighth largest city, with around 412,000 residents. As with most other Bay Area communities, the national and regional economic weakness has resulted in job losses and significant increases in unemployment levels over the past four years. However, recent unemployment data indicate an improvement with the March 2005 unemployment rate plummeting to 7.9% from its 10.2% level one year ago. The current level remains high, which has been characteristic for Oakland. Meanwhile, the city's assessed values have posted impressive gains, averaging 8.1% per year since fiscal 1999 and including a strong 8.1% rise in fiscal 2005. Ongoing construction and strong building permit activity suggest that assessed value will continue to rise. New businesses and residents will continue to be attracted by more affordable land, office space, and general cost of living than much of the region. Similarly, income levels remain below county, state, and national averages.
The city's financial position remains stable due to substantial expenditure reductions and revenue enhancements. While the city experienced two consecutive years of operating surpluses, which helped replenish fund balances, a drawdown led to a decline in the unreserved fund balance to $48.6 million, a still healthy 9.8% of operating expenditure by fiscal 2004's year end. Although below earlier levels, fund balances remain adequate due largely to the city's adoption of substantial budget cuts to offset rising personnel costs.
Fitch notes a sizable $268.6 million unfunded actuarial accrued liability in the city's closed Police and Fire Retirement System (PFRS), as well as city efforts to date to address it. As a result of a funding agreement between the PFRS board and the city following a pension obligation bond issue in 1997, the city is not required to make any contributions through fiscal 2011. However, beginning in fiscal 2012, the actuary expects the city payment to be $41 million, a significant figure relative to the city's operating budget.
Oakland is beginning to proactively manage this upcoming cost by establishing a stabilization fund to collect excess property tax payments levied solely for the PFRS system and to voluntarily contribute funds later this year. While noting the city's recent prudent actions, Fitch will continue to monitor continuation of efforts to moderate the PFRS long-term budget implications.
© 2005 Business Wire
