Bangkok--8 Apr--Standard & Poor's
Standard & Poor's Ratings Services has assigned its 'AA-' rating to the City of Salem, Ore.'s $102.6 million series 2009 full faith and credit obligations. At the same time, Standard & Poor's assigned its 'AA-' rating to Salem's $35.5 million series 2009 general obligation (GO) bonds and affirmed its 'AA-' underlying rating on the city's GO debt outstanding. The outlook is stable.
"We believe the rating reflects Salem's position as an economic and government center that has experienced steady growth in recent years; steady assessed value growth and very strong per capita market value; strong available fund balance at fiscal 2008 year end; and moderate debt burden and carrying charge," said Standard & Poor's credit analyst Hilary Sutton.
We understand that proceeds from the full faith and credit obligations will refinance Salem's commercial paper outstanding and fund water and sewer system capital improvements; and that the city intends to pay debt service from available revenues of its water and sewer system. We also understand that proceeds from the GO bonds will finance street and bridge improvements and refund all of the city's series 1999 GO bond maturities outstanding.
Salem is in Marion and Polk Counties in the Mid-Willamette Valley, approximately 45 miles south of Portland, Ore. It is the Oregon state capital, as well as the Marion County seat and the state's third-largest city. Population growth was steady from 2005-2008, in our view, averaging about 2% annually to 153,267. Local economic activity is closely tied to state government, agriculture, food processing and forest products but we understand that high technology is becoming increasingly important.
The stable outlook reflects our expectation that revisions to Salem's budgets and operations will allow it to maintain what we consider to be a good financial position. Moreover, the outlook reflects our expectation that the city's utility will generate sufficient net revenue and that Salem will not have to use its general fund to support the 2009 full faith and credit obligations. We believe a trend of fund balance declines could suggest weakening credit.
RELATED RESEARCH
USPF Criteria: "GO Debt," Oct. 12, 2006
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Hilary A Sutton, New York (1) 212-438-7093
Chris Morgan, San Francisco (1) 415-371-5032