Santa Monica planned to sell $41 million of lease-revenue bonds this week to fund renovations of a parking garage to serve the city’s downtown shopping area and to refund existing bonds.
Fitch Ratings gave the lease revenue bonds a AA-plus, reflecting what analysts considered the bonds’ sound legal structure and the city’s very strong financial position, shown by a high financial cushion, projected balanced operations, and prudent financial management practices.
Analysts also cited the city’s vibrant retail and hospitality sectors and affluent taxpayer base with per-capita incomes twice that of the county, state and national averages.
The Series 2011A lease revenue bonds are structured as a standard lease-leaseback arrangement between the city and the Santa Monica Public Financing Authority, with proceeds used for the parking garage, according to the Fitch report.
The bonds were rated one notch below the city’s AAA GO rating because of lease features in which the bonds are secured by rental payments from Santa Monica to the authority initially for use by the city’s main library, the report said.
Fitch analysts said they view the parking garage as a sufficiently essential asset, given the importance of parking to the tourism and retail components of the downtown area, the scarcity of parking under current conditions, and the profitability of the parking system.
The city also plans a 21% equity contribution to the project. Santa Monica’s debt profile is good, with low to moderate debt levels resulting from significant pay-as-you-go capital spending.
The city posted an $18.5 million surplus from operations in 2010, raising general fund reserve balances to $215.5 million, according to the Fitch Ratings report.
Though regional home prices have declined substantially, Santa Monic’s fiscal 2012 assessed valuation rose 3.2% to an all-time high of $24.6 billion, after a brief dip in fiscal 2011.