LOS ANGELES — Moody's Investors Service upgraded Fresno, Calif.'s issuer rating to A3 from Baa1 and revised the city’s outlook from stable to positive citing its improved economic profile.
Moody’s also upgraded lease revenue, pension and judgment bonds affecting $306 million in debt that still remains at speculative grade.
“The rating upgrades reflect improvement in the city's fundamental economic profile, with recent growth in taxable property values, sales tax collections and employment,” Moody’s analysts wrote Sept. 16.
In addition to upgrading the city’s general obligation unlimited tax, or issuer rating, Moody’s also upgraded its lease-backed obligations by one notch to Ba1 from Ba2. The city’s 2006A Convention Center bonds, 2002 pension obligation bonds and 2002 judgment obligation bonds also received a one-notch bump to Ba2 from Ba3. It also maintained a positive outlook on the city’s lease-backed obligations.
The city of more than half a million people is the economic center of the San Joaquin Valley, one of the most productive agricultural regions in the U.S.
Budgetary strides include consecutive operating surpluses in fiscal 2014 and 2015, elimination of a general fund balance deficit, repayment of inter-fund borrowing, and the adoption of sound management practices, Moody’s wrote. City leaders have updated zoning laws and improved economic development objectives, revised its reserve policy and struck a favorable labor settlement with the police union.
Fresno’s A3 issuer rating represents what its general obligation bond rating would if it had outstanding GO debt. The city’s lower lease-backed ratings reflect the city’s still somewhat weak financial position, according to analysts.
The positive outlooks assigned to the city's lease revenue, pension and judgment bonds reflect Moody’s expectation that key fundamental credit factors undergird the city's ratings at potentially higher levels should current trends continue. If the city’s audited fiscal 2015 results are in line with projections and economic growth continues it will bode well for future reviews, analysts said.