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City merits highest S&P rating

Posted: September 7, 2012 5:43 p.m.
Updated: September 7, 2012 5:43 p.m.

Standard & Poor’s has upgraded Santa Clarita’s credit rating to AAA status, city officials said Friday, noting it’s the highest rating a municipality can receive from the rating service.

“The city is conservative and practices proactive management of its budget, resulting in its ability to maintain very strong general fund reserves despite what has taken place over the last several years,” said Daniel Zuccarelllo, credit analyst for S&P.

“In fact, the reserves have been strong across the board,” he said.

In the rationale report issued by S&P on Sept. 6, the rating service said it upgraded Santa Clarita’s standing based on the city’s general credit worthiness, including residential property tax base, strong- to very-strong income, good managerial policies, low funding dependence on the federal government, and low- to moderate overall debt.

Overall, the credit rating firm considered Santa Clarita to be stable with a healthy operating surplus, and in reviewing the city’s general fund reserves and operating expenditures it found the city’s health to be “very strong.”

The city of Santa Clarita was first rated in 2005 and received an AA- rating, Zuccarelllo said. In 2007 the city was upgraded to AA, and in 2009 it was bumped up to an AA+ rating.

The most recent rating, AAA, is defined by S&P as an “extremely strong capacity to meet financial commitments.”
The city of Santa Clarita joins other triple-A rated Southern California cities such as Pasadena, Burbank and Glendale.

In a statement issued after the city was notified of its upgraded rating, City Manager Ken Pulskamp, said: “We set a conservative fiscal plan 25 years ago when the city was established. This is the result of 25 years of continuity in that approach to budgeting and financial management.”

S&P’s report also looks at the city’s median household income, which it rates as “very strong,” and unemployment rates, which remain below state and national levels. The city’s diverse property tax base is considered to be “very strong.”

Also reviewed were the city’s contributions to the California Public Employees Retirement System. S&P noted the city has contributed 100 percent of its required annual contributions in each of the past three audited fiscal years.

In fiscal year 2011, the city contributed $4.9 million to the fund, equaling some 3.6 percent of the city’s expenses for the year.

The S&P report specifically made mention of the dissolution of redevelopment agencies, stating the loss of this program has had only a minimal effect on the city’s general fund operations.

Santa Clarita’s new AAA rating is a very strong statement about the city’s economic “resilience and management sophistication,” said Matt Fabian, a municipal analyst for 18 years and managing director of Municipal Market Advisors in Westport, Conn.

The only weak spot noted in the anaylsis of Santa Clarita was that, while “financial practices exist in most areas, officials might not formalize or regularly monitor all of them.”

Still, S&P’s outlook is that the city’s proactive budgeting approach and ability to maintain consistent operations, supported by very strong general fund reserves, merits the AAA rating.




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