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Fresno’s bond ratings stable, but lower than expected

Fresno Mayor Ashley Swearengin, center, speaks at a May 2015 news conference with other city leaders at Vinland Park in east-central Fresno to highlight proposals in the city’s 2015-16 budget, including boosting investments in Fresno’s parks.
Fresno Mayor Ashley Swearengin, center, speaks at a May 2015 news conference with other city leaders at Vinland Park in east-central Fresno to highlight proposals in the city’s 2015-16 budget, including boosting investments in Fresno’s parks. ezamora@fresnobee.com

Fresno’s municipal credit rating is good and considered stable, but it is lower than what is typical for a large U.S. city, according to a major ratings firm.

San Francisco-based Fitch Ratings recently affirmed the city’s implied rating for general obligation bonds at BBB+, which indicates good credit quality. Several other bond series were rated shades lower: a BBB rating for $43.4 million in lease-revenue bonds issued in 2006 and 2009 by the Fresno Joint Powers Financing Authority; and BBB- for $100.8 million in 2004 and 2008 lease revenue bonds.

The agency added that Fresno’s credit outlook is stable.

Fitch Ratings rates credit on a scale from AAA, or highest credit quality, through D, a default. BBB is in the middle of the scale at a level that denotes investment-grade credit with low expectations for default and adequate capacity for payment, but at risk for adverse business or economic conditions.

“Fresno’s rating is below the expected range for a U.S. municipality and is particularly low for a large city, most of which are rated ‘A’ or higher,” Fitch analysts state in their report.

Analysts indicate the city took steps during the recession to improve its financial standing, including managing reserves and labor contracts. “Fitch expects the rating to rise over the next several years if the city continues to follow the financial policies instituted during the Great Recession, but Fitch’s approach is likely to be conservative and gradual.”

Another factor playing into Fresno’s lower rating is the weakness of the central San Joaquin Valley economy.

“Fresno’s economy is growing at a healthy pace, but remains a fundamental weakness due to chronically high unemployment and weak incomes,” the analysis states. “Fresno’s economy remains largely driven by low-wage agriculture-related activity (and) unemployment trends higher than the national and state averages.”

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