Fitch Rates $110MM San Francisco Fin Corp (California) Lease Rev Bank Bonds 'AA-'; Outlook Stable

SAN FRANCISCO--()--Fitch Ratings has assigned 'AA-' ratings to bank bonds corresponding to the following series of City and County of San Francisco Finance Corporation (the corporation) lease revenue bonds:

--$55 million lease revenue refunding bonds, series 2008-1 (Moscone Center Expansion Project);

--$55 million lease revenue refunding bonds, series 2008-2 (Moscone Center Expansion Project).

The rating has been assigned in conjunction with the provision of a letter of credit and reimbursement agreements (LOCs) between the corporation and State Street Bank and Trust Company.

The lease revenue bonds are secured by lease payments made by the city and county of San Francisco (the city) for use and occupancy of the 300,000 square foot Moscone West convention center, which is part of the three Moscone Convention Center facilities in the city's Yerba Buena cultural and convention neighborhood. Additional security is provided by standard insurance provisions.

Based on a review of the terms governing the bank bonds, it is Fitch's opinion that the incremental risk associated with the bank bonds does not have a material impact on the long-term credit rating of the city.

The LOCs are expected to close on October 8.

The Rating Outlook is Stable.

KEY RATING DRIVERS

FINANCIAL POLICIES SUPPORT STABILITY: The 'AA' GO rating reflects sound budgeting, planning and reserve policies that Fitch believes will limit what has historically been a high level of volatility in year-to-year financial performance. Further progress towards containing post-retirement benefit liabilities also supports the rating.

EXCEPTIONALLY STRONG ECONOMIC BASE: San Francisco's large and dynamic economy has seen continued strong labor force and employment growth rates. Taxable assessed valuation (TAV) growth remains robust. Wealth indicators are very strong and the tax and employment bases are very diverse.

SOUND FINANCIAL POSITION: The city rebuilt its available fund balance (unrestricted fund balance plus rainy day reserve) to solid levels after drawing down its reserves rapidly during the recession. New policies are structured to slow the use of reserves in a recession.

STRONG FINANCIAL MANAGEMENT, OVERSIGHT: The city's charter requires periodic budget monitoring and gives the independent controller strong expenditure control.

MIXED LONG-TERM LIABILITY PROFILE: The city's overall debt is high on a per capita basis, but Fitch considers it affordable given the city's wealth levels and strong tax base. Capital needs are large, but above-average amortization should keep the city's direct debt levels affordable. Carrying costs including debt service, pension and other post-employment benefit (OPEB) costs are moderate but rising.

RATING SENSITIVITIES

SUSTAINED POSITIVE OPERATIONS: Continued surplus operations and increases in reserves could lead to upward rating pressure.

For additional information on San Francisco, see Fitch's rating action commentary 'Fitch Rates $164MM San Francisco, CA's GOs 'AA'; Affirms Outstanding; Outlook Stable', dated Sept. 10, 2014 and available 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.

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=880134

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Contacts

Fitch Ratings
Primary Analyst
Karen Ribble
Senior Director
+1-415-732-5611
Fitch Ratings, Inc.
650 California Street, 4th Floor
San Francisco, CA 94108
or
Secondary Analyst
Stephen Walsh
Director
+1-415-732-7573
or
Committee Chairperson
Arlene Bohner
Senior Director
+1-212-908-1554
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Karen Ribble
Senior Director
+1-415-732-5611
Fitch Ratings, Inc.
650 California Street, 4th Floor
San Francisco, CA 94108
or
Secondary Analyst
Stephen Walsh
Director
+1-415-732-7573
or
Committee Chairperson
Arlene Bohner
Senior Director
+1-212-908-1554
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com