Economic shifts drive Oakland upgrade
Oakland, California got a rating boost thanks to rising property values, a strong job market and a growing economy.
Fitch Ratings upgraded the city's issuer default rating to AA-minus from A-plus Monday. The outlook is stable.
“The upgrades reflect improvement in revenue growth prospects due to fundamental changes in the economic resource base, improved financial resilience, and a change in Fitch's assessment of the city's inherent budget flexibility,” the ratings agency’s analysts said.
Fitch also moved the rating on the city’s $68.7 million 2001 pension obligation refunding bonds from A to A-plus.
That ratings reflects “a slightly higher degree of optionality associated with appropriation backed bonds.”
As the third-largest San Francisco Bay Area city, Oakland has benefited from a large service-based economy that has grown as part of the region tech economy, Fitch’s analysts said. The city is also a hub for healthcare, government and transportation with a regional airport and one of the largest ports in the nation, Fitch said.
“While much of the recent improvement in Oakland's economy likely reflects cyclical factors, changing residential and employment patterns suggest that the city's economic resource base may be experiencing more fundamental changes,” Fitch’s analysts said. “The formerly industrial city has steadily shifted to a more service-based economy in recent decades, and economic change has been particularly noticeable in recent years, as new residents moved to the city from more expensive housing markets in San Francisco and Silicon Valley.”
Oakland still has pockets of poverty and an individual poverty rate of about 20% but its median household and per capita money income are above the national average while still below the regional average, according to the report.
The city’s population has grown almost 9% since 2010 to about 425,000 residents in 2017 while about 40% of its residents have a bachelor’s degree or higher – well above the national level.
Property values are rising, commercial vacancy rates in the city’s downtown are low and the city has new residential and office development projects in the pipeline, the report said. Taxable assessed values went up 33% between 2011 and 2017.