Marysville, CA COP Rating Raised To #A-# On Maintenance Of Structural Outlook Stable

Stocks and Financial Services Press Releases Thursday April 12, 2018 11:42
SAN FRANCISCO--12 Apr--S&P Global Ratings

SAN FRANCISCO (S&P Global Ratings) April 11, 2018--S&P Global Ratings raised its long-term rating to 'A-' from 'BBB+' on the City of Marysville, Calif.'s certificates of participation (COPs). At the same time, S&P Global Ratings removed the rating from CreditWatch with developing implications, where it had been placed on Oct 10, 2017. The outlook is stable.

"Following resolution of our CreditWatch placement, the rating action reflects our view of an improved economic base and the city's new ongoing source of revenue, which are helping the city to maintain structural balance," said S&P Global Ratings credit analyst Ben Geare.

"While we observed audit discrepancies in descriptions of the city's pension liabilities, we were able to obtain timely information of satisfactory quality to maintain our rating provided by the California Public Employees' Retirement System," continued Mr. Geare. "Based on subsequent conversations with management, we believe Marysville will be able to maintain balanced operating results and rebuild its fund balance--despite receiving a 'going concern' opinion in the city's financial statement audit."

The rating further reflects our view of the city's:
  • Weak economy, but access to a broad and diverse metropolitan statistical area;
  • Adequate management, with standard financial policies and practices under our Financial Management Assessment methodology;
  • Strong budgetary performance, with operating surpluses in the general fund and at the total governmental fund level in fiscal 2016;
  • Adequate budgetary flexibility, with a low nominal available fund balance that we expect will improve as a percentage of expenditures in the near term;
  • Very strong liquidity, and access to external liquidity we consider strong;
  • Very weak debt and contingent liability profile, as well as overall net debt we consider high because sufficiently current overlapping debt figures are not available and because of a large pension and other postemployment benefit obligation and the lack of a plan to sufficiently address the obligation; and
  • Strong institutional framework score.

The stable outlook reflects our view of an improving economic base and the stability provided by the city's new ongoing source of revenue, as well as our assumption that the city's future audits will present the city's pension information clearly and not contain any adverse findings. We do not expect to change our rating during our two-year outlook horizon.

We could raise the rating if the city experiences a significant increase in income and wealth metrics to levels comparable with those of higher-rated peers and sustains available reserves above $500,000.
We could lower the rating if the city reverts back to its budgetary imbalances and does not adequately adjust its budget.

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