Fitch assigns an 'A' underlying rating to the Oakland Joint Powers
Financing Authority's (the authority) (Alameda County, California)
$110.3 million refunding revenue bonds, 2008 series A-1 (tax-exempt) and
$20.3 million refunding revenue bonds, 2008 series A-2 (taxable). In
addition, Fitch affirms the following 'A' underlying ratings:
--City of Oakland pension obligation bonds, 1997 series A ($118.0
million);
-- City of Oakland pension obligation bonds, 2001 series ($195.6
million);
-- The authority's refunding revenue bonds, 2005 series A-1, A-2, and B
($128.1 million to be refunded by the 2008 series bonds).
Fitch also affirms the following 'A+' underlying ratings:
--City of Oakland general obligation (GO) bonds ($121.5 million)
-- The authority's (city of Oakland GO bond program) refunding revenue
bonds, 2005 series ($111.7 million).
The Rating Outlook is Stable.
The 2008 series bonds are expected to sell via negotiation on Apr. 3,
2008. The 2008 bonds will refund the authority's revenue refunding
bonds, 2005 series A-1, A-2, and B (auction rate securities).
The 'A' rating reflects the city's credit fundamentals and a strong
lease structure with payments intended to be made from a dedicated
limited property tax. While the leased assets are sewer pipes, highly
essential to the city's operation, Fitch views as a weakness the bond
trustee's inability to repossess the pipes in the event of a city
default. The lease features are sound and typical of California leases.
Since the bonds are tied to an original 1985 issue that benefited PFRS,
the city intends to make its lease payments from voter-approved tax
override revenues dedicated solely to PFRS funding. Fitch views this
dedicated levy as a credit strength.
Oakland's 'A+' GO bond rating also reflects the city's consistently
strong financial position, with above-average unreserved general fund
balances, and its good fiscal management, including adherence to many
conservative financial management policies. While the city has benefited
from very healthy assessed valuation (AV) growth, the property market
slowdown will create financial pressure given the importance of property
tax revenues. Debt is at moderate-to-high levels and there is a sizable
unfunded actuarial accrued liability remaining in PFRS of approximately
$268.7 million which the city will need to start paying down in fiscal
2012.
As the urban core of the San Francisco Bay Area's East Bay, Oakland is
home to approximately 400,000 residents and a major commercial and trade
center, including one of the West Coast's busiest ports. The city's
socio-economic characteristics are mixed, with a declining labor force,
a consistently higher unemployment rate than in the county and state,
and average wealth levels. The city's assessed values have posted
impressive gains, averaging over 9% per year between fiscals 2002-2008.
The property market, however, has been slowing in line with national
trends.
The city's financial position remains strong. In fiscal 2007, the
unreserved general fund balance was $143.0 million or almost 26% of
spending. City management is closely monitoring fiscal 2008 performance
and fiscal 2009 budgeting to ensure continued revenue and expenditure
balance in an environment shaped by the slowing property market, rising
personnel costs, and state funding deficits. To that end, the city is
focusing on economic development and property redevelopment.
Debt levels are moderate-to-high. Net direct debt is $2,681 per capita,
or a moderate 2.7% of taxable AV. Overall net debt is much higher at
$5,438 per capita, or 5.4% of taxable AV.
Fitch's rating definitions and the terms of use of such ratings are
available on the agency's public web site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance, and other relevant policies
and procedures are also available from the 'Code of Conduct' section of
this site.
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