Standard & Poor's has raised its rating on Sausalito, Calif.'s general obligation bonds two notches to AA-plus based on its recently released local GO criteria.

Analysts said the rating reflects their assessment of the city's strong economy, benefiting from its access to the San Francisco bay area, strong budgetary flexibility, and strong liquidity supporting the city's finances.

Sausalito, with a population of approximately 7,000, is located near the northern end of the Golden Gate Bridge. The city's projected per capita effective buying income is strong and its $362,159 per capital market value is considered to be exceptionally high, analysts said.

They noted, however, that the city's recent budgetary performance has been weak overall, taking into account capital spending and one-time items. Management has taken steps to close the structural deficit through payroll and benefit changes, which Standard & Poor's believes will help alleviate the operating imbalance in the medium term.

"The stable outlook reflects our opinion of the city's very strong economy and its ability to rely on enterprise funds to support general fund operations," analysts said. "We do not expect to lower the ratings during the two-year outlook horizon."

Standard & Poor's said it could, however, raise the ratings if the city succeeds in balancing operations and improving financial performance.

The agency assigned the new rating after releasing its local GO bond criteria on Sept. 12. The new methodology aims to improve transparency and make the criteria more in-depth, detailed, and forward looking, according to Standard & Poor's.

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