LOS ANGELES — Fitch Ratings assigned an F1-plus rating to Riverside, Calif.'s plans to refund $30 million in taxable pension obligation bond anticipation notes, and also affirmed the ratings on another $112 million in debt.
Fitch April 21 affirmed its AA rating on $14.3 million of general obligation bonds; its AA-minus rating on $18.5 million of taxable pension obligation bonds, series 2005A; its AA-minus rating on $20.7 million certificates of participation, series 2010; its A-plus rating on $18.6 million of lease revenue COPs, series 2006; and Riverside Public Financing Authority's AA-minus rating on $39.9 million lease revenue refunding bonds, series 2012A.
The Rating Outlook is stable.
The BANs are expected to sell via negotiation the week of May 4. Proceeds will be used to refund the city's outstanding $30 million taxable pension obligation BANs, 2014 series A, which Fitch is affirming at F1-plus.
Riverside is the seat of Riverside County, 60 miles east of Los Angeles, and the 12th largest city in California with a population of 314,034.
The F1-plus rating on the BANs reflects anticipated market access based on the city's long-term AA rating.
"The COPs, lease revenue bonds, and POBs are rated one notch below the GO bonds as they are payable solely from any legally available funds. The A-plus lease revenue COP rating (series 2006) further reflects the non-essential nature of the leased assets," according to Fitch analysts.
The pension obligation BANs and POBs are secured by the city's absolute and unconditional obligation, payable from any legally available funds. The GO bonds are secured by the city's full faith and credit and unlimited ad valorem property tax pledge.
The key rating drivers, according to Fitch, were consistently good financial performance, stabilization of a weak economy, revenue diversity and a complex debt profile.
"The city maintains healthy reserves, aided by expenditure flexibility and diverse revenue sources. Fitch expects the city to manage cost pressures within its limited growth revenue framework," according to Fitch analysts.
The economy also continues to improve after being severely affected by the housing-led downturn; and home prices and the employment base are both recovering steadily.
Variable-rate and short-term obligations represent a combined 46% of total governmental debt, exposing the city to liquidity and market risk, according to Fitch.
Rating sensitivities also include challenges in maintain fiscal balance amid salary and pension cost pressures as the modest recovery continues, according to analysts.