Standard & Poor's upgraded Folsom general obligation bonds to AA from AA-minus ahead of a $12 million refunding issue. The agency gave a stable outlook on the Sacramento County city's debt.
"The stable outlook reflects our view of the city's strong local economy and the city's ability to weather the current economic instability through its strong general fund balance," said analyst Li H. Yang. "The outlook also reflects our view of the city's strong financial management practices, and we anticipate the city will maintain reserves at healthy levels going forward."
Moody's Investors Service also this week affirmed its A1 GO rating on the city of 71,000 people.
The city, which is home to Folsom State Prison, boasts median incomes that are "well over the national average at 176%," and the city's jobless rate was less than half of the state level in June at 5.4%, versus 11.6% statewide.
Like other Central Valley cities, Folsom has been hurt by the bursting of the housing market bubble. Assessed value per capita is "extremely strong" at $151,000, but values are expected to be flat or only slightly positive this year, compared to 10% annual growth rates during the housing boom. Sales tax revenues fell "substantially" from fiscal 2007 to 2009, Yang said in a report.
"The city's finances have remained strong, in our view, despite the current economic downturn," Yang said. He said the city's general fund reserve balance was $12.2 million, or 19% of expenditures, at the end of 2008.
