Mar. 19, 2010 (Business Wire) -- Fitch Ratings takes the following rating action on Utica, New York's general obligation (GO) bonds as part of its continuous surveillance effort:
--Approximately $80,000 GO bonds, series 1991, affirmed at 'BBB';
--Approximately $3.45 million pension obligation bonds, series 2008A, affirmed at 'BBB'
--Approximately $39.6 million GO public improvement bonds, series 2000, 2003, 2004, 2006 and 2007 affirmed at 'BBB'.
The Rating Outlook is Stable.
RATING RATIONALE:
--The city continues to maintain an adequate financial position despite a high fixed-cost burden and ongoing economic challenges.
--Management's willingness to raise recurring revenues and rely less on transfers from the water trust fund provides ongoing financial stability.
--The city's direct debt burden is manageable with above-average debt amortization and should remain so given limited future capital needs.
--Tax base is weak/limited but remains stable; some growth is anticipated as a result of ongoing development in the city.
KEY RATING DRIVERS:
--Continued reliance on state aid;
--High overall debt burden including county and school district.
SECURITY:
The bonds are general obligations of the city backed by a pledge of its full faith and credit and its unlimited taxing power.
CREDIT SUMMARY:
Located in central New York within Oneida County (the county), Utica has shown marginal economic improvement in recent years. Population loss appears to have moderated recently, with the city's 2008 population estimated at 58,082, down 3.8% compared to the 2000 census and in contrast to the rapid 11.6% loss during the 1990s. The services sector remains a major contributor to the city's labor force, with entities such as Metropolitan Insurance, Blue Cross/Blue Shield, and Bank of America among the tenants located in the city's business park. The successful gaming operation at the nearby Oneida Indian Nation and continual development efforts at the Griffiss Business Technology Park have also helped expand and diversify the area's economic base. The city's unemployment rate has climbed to 8.2% in December 2009 from 7.2% in December 2008 but remains below the state and national levels, at 9.7%, 8.8% and 9.7%, respectively, for the same time period. Income levels remain below average by all measures, and market value per capita is a weak $21,938. The city's tax base had been relatively stagnant since the beginning of the decade, though taxable market value has seen some improvement in 2009 and is projected to increase slightly in 2010.
The city's financial position has improved since its fiscal problems in the early 1990s. Fiscal stability returned to the city in 1996, and the city has achieved positive operations since that time. After achieving a slight surplus for fiscal 2008, audited fiscal 2009 results indicated a general fund operating surplus of $208,000, leading to a total unreserved general fund balance of $4.605 million, or 6.9% of expenditures and transfers out. Fiscal 2009 results benefited from the transfer in of pension bond proceeds of $3.45 million and a previously budgeted $2 million transfer from the city's water trust fund.
The city expects to make a small draw in fiscal 2010, which will end March 31, 2010, but reports that revenues from property tax collections and sale tax receipts are at or close to budget. For the proposed fiscal 2011 budget, the city has reduced expenditures by almost $2 million and projects a small increase in sales tax receipts but a decline in state aid funding which constitutes approximately 25% of total general fund revenues. Leading expenditures in the 2011 budget as in prior years are public safety at over 45% of spending, and employee benefits at 22%. The city reduced the budgeted transfer to the general fund from the water trust fund to $1.35 million from $2.05 million in 2010. The current balance in the city's water trust fund is $2.5 million.
Given the lack of growth-related capital needs, direct debt levels should remain moderate. Direct debt per capita is $936 but represents a moderate 4.3% of market value, reflecting the weak tax base. Overall debt levels, reflecting debt issued by the county and city's school district, are significantly higher at $2,094 and 9.5% of market value. The city's most recent capital improvement plan (CIP) primarily addresses deferred maintenance needs and totals an estimated $56 million, the funding for which is allocated annually. While the city will issue additional debt for a portion of its CIP, the city continues to actively pursue grant funding for many of its capital projects. The city sold pension bonds in 2008 to pay its outstanding firemen's pension obligation to the state and expects to sell an additional $1.98 million for its outstanding police pension obligation later in 2010. The city is making 100% of its contributions to the state for all of its current pension obligations. The city other post employment benefits (OPEB) liability is $68.6 million as of March 31, 2009 and the city pay-as-you-go contribution totaled $ 2.8 million in 2009. The city amortizes its debt at an above-average rate; 73% of outstanding debt will be retired within 10 years.
Applicable criteria available on Fitch's website at 'www.fitchratings.com' include:
--'Tax-Supported Rating Criteria' (Dec. 21, 2009);
--'U.S. Local Government Tax-Supported Rating Criteria', (Dec. 21, 2009).
Additional information is available at 'www.fitchratings.com'.
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