Standard & Poor’s (S&P) has affirmed its AAA issuer credit rating and stable outlook for Pasadena, citing the city’s “very strong” economy and financial management.
A report by the agency released on June 5 said the city’s local economy is very strong, “with projected per capita effective buying income at 143 percent of the national average and per capita market value of roughly $165,600.”
The agency report also cited the 9.9 percent decrease in the Los Angeles County unemployment rate for 2013 and its continuous decrease for the past several years as a factor for the city’s credit strength.
The stable outlook means that the agency expects that the city will retain its status as a destination for retail, tourism and employment, and that its economy will remain very strong. The outlook also reflects the city’s expected “very strong budgetary flexibility with adequate budgetary performance,” the report said.
In addition S&P affirmed Pasadena’s AA+ long-term rating and underlying rating on the city’s certificates of participation and pension obligation bonds outstanding.
The pension obligation bonds are unconditional obligations of the city. The bonds are not secured by the cityâ€™s taxing authority.
The certificates of participation, meanwhile, are secured by lease payments made by the city from all legally available funds for the use and occupancy of a variety of leased assets. The city covenants to budget and appropriate annually for debt service, subject to abatement if the facilities are not available for full use and occupancy. The bonds are also covered by standard rental interruption insurance.
Another contributing factor to the city’s AAA issuer credit rating is its financial practices that are under the S&P’s Financial Management Assessment methodology, which indicates that the practices are “well-embedded and our likely sustainable.”
The report said the city’s debt and contingent liabilities is “adequate,” with approximately 69 percent of the debt repaid within 10 years.
But the report said a negative factor for the credit rating is Pasadena’s large pension/other post-employment benefit obligations. The city contributed 100 percent of its annual required pension contribution for 2013, and the annual pension and other post-employment benefits accounted for 13 percent of the total government expenditures in the same year, the report said.
The ratings are expected to remain the same within the two-year outlook time frame.