San Diego's Credit Rating Upgraded, Positioning the City for Lower-Cost Infrastructure Projects
Fitch Ratings Agency Notes City’s Strong Fiscal Practices & Healthy Local Economy in Decision
Thursday, February 23, 2017 - NEWS RELEASE
SAN DIEGO – Highlighting the City of San Diego’s strong fiscal practices and healthy local economy, Fitch Ratings has upgraded the City’s credit rating – a move that could lower future borrowing costs for infrastructure projects.
“This credit upgrade is a validation of the City's responsible financial practices and further proof that San Diego's economy is strong and growing,” said Mayor Kevin L. Faulconer. “It's a testament to our staff's tireless commitment to fiscal discipline and ability to manage our finances no matter what comes our way. I look forward to working with the City Council to maintain our long-term budgetary health and keep the City on a stable financial footing.”
Fitch Ratings upgraded the City’s Issuer Rating from AA- to AA and upgraded the City’s General Fund-backed Lease Revenue Bonds from A+ to AA-, with a stable outlook for all ratings.
According to Fitch Ratings, this reflects the City’s “exceptionally strong gap closing capacity and satisfactory reserves [that] result from the City’s strong general fund revenue performance, solid expenditure flexibility, healthy economy and tax base, conservative financial management policies, and strong financial planning and disclosure practices.”
Last year, Fitch Ratings designated the City’s credit rating outlook “positive,” indicating that the City’s continued positive trajectory could lead to potential upgrade.
“As chair of the City Council’s Budget and Government Efficiency Committee, I am committed to maintaining a structurally balanced budget, sustaining healthy reserves, and preserving these new ratings as we move into a challenging Fiscal Year 2018 budget process,” said City Councilmember Barbara Bry.
Fitch made the credit upgrade as the City prepares for a lean Fiscal Year 2018 Budget, demonstrating confidence in the City's strong financial discipline and underlying fiscal health. Fitch noted the “city’s exceptionally strong gap-closing capacity” as it faces the FY2018 budget. Pension costs will increase faster next fiscal year than projected tax revenue, leaving an estimated $47 million shortfall in the City’s operating budget for the coming year. Mayor Faulconer will release his balanced budget proposal by April 15.
“As a result of the credit rating upgrade, the City expects lower borrowing costs for our General Fund capital program, meaning more future bond funds can be used for infrastructure rather than for financing costs,” said Mary Lewis, the City’s Chief Financial Officer.
Fitch Ratings defines entities in the AA category, such as the City of San Diego, as having very high credit quality, expectations of very low default risk, very strong capacity for payment of financial commitments and not being significantly vulnerable to foreseeable events.
CONTACT: Craig Gustafson at (619) 453-9880 or [email protected]