SAN FRANCISCO--(BUSINESS WIRE)--Fitch assigns an 'AA+' rating to $33.1 million San Jose, California's (the city) general obligation (GO) bonds, series 2008 (libraries and parks projects). Fitch also assigns an underlying rating of 'AA' to $60.4 million City of San Jose Financing Authority lease revenue bonds, series 2008A (civic center refunding project). Fitch also affirms the 'AA+' rating on the city's approximately $495 million in outstanding GO bonds and the 'AA' on the $710 million in various outstanding lease revenue bonds. The Rating Outlook is Stable. The GO bonds will be sold on or about June 11th and the lease revenue bonds will price on June 9th.The GO bonds are secured by the city's unlimited full faith and credit ad valorem tax levy while the lease revenue bonds are secured by lease payments made by the city for the use and occupancy of the city's civic center. The lease provisions are standard and typical of California leases, including a debt service reserve fund.
The 'AA+' rating on the city's GO bonds reflects the city's overall sound credit quality, marked by its strong financial position, diverse revenues, and above-average demographics as well as the city's cyclical economy and slow debt amortization. In addition, the 'AA' rating on the lease revenue bonds also reflects strong lease characteristics. The city's strong financial position is the result of prudent budgeting and management which Fitch expects the city to maintain as the economy and revenue growth slow.
San Jose covers over 178 square miles at the southern end of the San Francisco Bay. With a population of about 989,000, the city is the largest in the Bay Area and the 3rd largest in the state. Its economy, like that of the region, continues to be tied to the high technology sector, although the focus has shifted somewhat from manufacturing to information and software. In addition, the city's economic development efforts are focused on attracting green technology companies. After experiencing significant job losses after the technology bust in the early part of the decade, the San Jose MSA experienced three years of job growth, including 2.4% in 2006 slowing to 1.7% growth in 2007. Despite the cyclical nature of its economy, the city will continue to benefit from its proximity to several universities as well as the abundance of venture capital companies. Socioeconomic indicators are positive, with per capita and median household income both well above state and national averages.
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