Fitch Rates City of Norfolk (VA) $32.4MM Bank Bonds 'AA+'; Outlook Stable

NEW YORK--()--Fitch Ratings assigns an 'AA+' rating to bank bonds corresponding to the following City of Norfolk, Virginia variable rate demand general obligation (GO) bonds in the event any bonds of the series are converted to bank bonds in the future:

--$32.4 million GO variable rate demand bonds, series 2007.

The bank bond rating is being assigned in connection with the city expecting a new standby bond purchase agreement (the agreement) between the city and the bank, effective March 19, 2014. Based on a review of the terms governing bank bonds specified in the agreement it is Fitch's opinion that the incremental risk associated with bank bonds does not have a material impact on the city's long-term credit rating.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the city, to which the city has pledged its full faith and credit and unlimited taxing power for payment.

KEY RATING DRIVERS

SIGNIFICANT MILITARY PRESENCE: Norfolk's maritime assets, including the world's largest naval stations and an active deepwater harbor, lend economic stability to the city and region.

ONGOING ECONOMIC DIVERSIFICATION: The city continues to focus its economic development efforts on downtown and neighborhood revitalization to diversify the economy and help offset the sizable proportion of tax-exempt property.

SOUND FINANCIAL PERFORMANCE: Timely expenditure reductions and realistic revenue forecasting have resulted in favorable operations and healthy reserve levels.

MODERATE LONG-TERM LIABILITY BURDEN: The city's overall tax-supported debt burden is expected to remain average due to manageable future capital needs. Amortization of outstanding principal is also average. Pension and other post-employment benefit (OPEB) contributions are moderate.

RATING SENSITIVITIES

STRONG FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics including the city's strong economy. Federal budget cuts could result in a softening of the regional economy given the preponderance of direct and indirect federally funded employment. However, Fitch does not currently expect the impact to be severe enough to alter the credit fundamentals.

For more information, see Fitch's press release 'Fitch Rates City of Norfolk GOs 'AA+'; Outlook Stable' dated March 11, 2014, available on Fitch's website at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823355

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Contacts

Fitch Ratings
Primary Analyst:
Evette Caze, +1-212-908-0376
Director
One State Street Plaza
New York NY 10004
or
Secondary Analyst:
Michael Rinaldi, +1-212-908-0833
Senior Director
or
Committee Chairperson
Douglas Offerman, +1-212-908-0889
Senior Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst:
Evette Caze, +1-212-908-0376
Director
One State Street Plaza
New York NY 10004
or
Secondary Analyst:
Michael Rinaldi, +1-212-908-0833
Senior Director
or
Committee Chairperson
Douglas Offerman, +1-212-908-0889
Senior Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com