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Rating Action:

MOODY'S ASSIGNS A1 RATING TO CITY AND COUNTY OF SAN FRANCISCO'S (CA) CERTIFICATES OF PARTICIPATION, SERIES 2012A (MULTIPLE CAPITAL IMPROVEMENT PROJECTS)

Global Credit Research - 04 May 2012

APPROXIMATELY $40,000,000 IN DEBT AFFECTED

New York, May 04, 2012 -- Moody's Rating

Issue: Certificates of Participation 2012A; Rating: A1; Sale Amount: $40,000,000; Expected Sale Date: 5-17-2012; Rating Description: Lease Rental: Abatement

Opinion

Moody's Investors Service has assigned an A1 rating to the City and County of San Francisco's Certificates of Participation, Series 2012A (Multiple Capital Improvement Projects). Our long term outlook on the city's ratings is stable.

RATING RATIONALE

The rating reflects the city's strong resident wealth levels and exceptionally large and diverse tax base that is a key segment of the greater Bay Area economy. The city's financial position has improved but is still not robust; its strong budgetary control is a mitigating factor to a still narrow fiscal position. San Francisco's moderate debt burden and modest exposure to variable rate debt are also incorporated into the rating.

The bonds are secured by base rental payments to be made by the City of San Francisco to the trustee for use and occupancy of the leased assets. The city covenants to budget and appropriate lease payments so long as it has use and occupancy of these assets. The leased assets include the Link and East Residence buildings, which have been renamed the Pavilion and North Residence buildings on the campus of the City's Laguna Honda Hospital. The buildings have a combined estimated value of $309 million. This borrowing combined with preexisting borrowings of 2009A ($153 million), 2009B ($36.1 million) obligations represent approximately $232 million leveraged against the leased assets.

The two notch rating distinction between the A1 rating on the current offering and the city's Aa2-rated general obligation bonds represents Moody's standard notching differential for fixed-asset leases relative to a California issuer's general obligation rating. Broadly speaking the two notches reflect the risk of abatement and the narrower, general fund security pledge for leases compared to the very strong, voter-approved unlimited property tax pledge securing California general obligation bonds.

STRENGTHS

Large, diverse tax base

Strong resident wealth levels

Conservatively structured debt portfolio

CHALLENGES

Improved but still narrow financial position

Increasing operating and personnel costs

Outlook

Our outlook for the city's long-term ratings is stable. This outlook recognizes that the city's large, diverse tax base is fundamentally sound. The outlook also reflects the city's still narrow though improving financial position. It incorporates the efforts the city is making to attain structural balance and rebuild its reserves, but also the distance it needs to go in order to achieve and maintain a positive financial trend and a healthy and resilient financial position. The city's conservative debt profile also contributes to the stable outlook on the city's ratings

WHAT COULD MAKE THE RATING GO UP

Attaining and maintaining a strong financial position

Sustained economic and assessed value growth

WHAT COULD MAKE THE RATING GO DOWN

Weakening financial position

Deteriorating socioeconomic factors

The principal methodology used in this rating was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in October 2004. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service's information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources.

However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Michael Wertz
Analyst
Public Finance Group
Moody's FIS Domestic Sales Office - San Francisco CA
One Sansome St. Suite 3100
San Francisco, CA 94104
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Eric Hoffmann
Senior Vice President
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S ASSIGNS A1 RATING TO CITY AND COUNTY OF SAN FRANCISCO'S (CA) CERTIFICATES OF PARTICIPATION, SERIES 2012A (MULTIPLE CAPITAL IMPROVEMENT PROJECTS)
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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