SAN BENITO — Despite the widespread economic downturn stemming from the coronavirus pandemic, the city seems to weathering the storm.
Now, Fitch Ratings is upgrading the city’s credit rating from A+ to AA — its second-highest rating which can help the city land lower interest rates when it borrows money.
Meanwhile, Fitch, one of the world’s leading credit rating agencies, is also boosting the city’s ratings outlook from “positive” to “stable,” reflecting a stronger foundation to meet financial commitments.
“In essence, this upgrade shows that credible, well-known credit agencies such as Fitch like our city’s business model,” City Manager Manuel De La Rosa stated Monday. “It shows that the city of San Benito is making sound fiduciary decisions and is managing the city’s funds in the best possible way.”
Fitch upgraded the city’s credit rating as officials prepare to refinance about $3 million in 2012 general obligation refunding bonds and about $8 million in 2011 and 2012 certificates of obligation.
“The upgraded rating signifies the agency’s belief that the city of San Benito will remain financially stable even through the current pandemic-induced downturn,” a city press release stated .
“The AA rating also reflects San Benito’s strong revenue framework, sound spending practices and conservative budget management. Moreover, the city’s tax base has experienced solid expansion over the past few years and has, in fact, gone up more than 20 percent since the 2017 fiscal year,” he said.
Fitch’s key points
The credit rating upgrade reflects the city’s “strong revenue framework, solid expenditure flexibility, moderate liabilities and strong budget management including eliminating of reliance on utility transfers and building reserves over the last several years.”
Since the coronavirus outbreak in March, the city’s sales tax collecting has bucked the trend.
“The city has not yet experienced significant revenue losses during the coronavirus pandemic,” Fitch wrote. “While Fitch believes the city remains vulnerable to declines as the impact of the current downturn flows through the economy, the city’s property and sales tax bases have performed well thus far. Sales tax, which account for about 29 percent of general fund revenues, are trending well. Per management, sales tax revenues from March to May 2020 exceeded revenues for the same months in 2019 by 15 percent.”
Amid its large low-income population, the city’s commercial and retail development are boosting its tax base.
“Despite below average wealth and income levels and lackluster population growth, the city’s tax base has experienced solid expansion over the past few years,” Fitch wrote. “Fiscal 2020 taxable assessed value, at $794 million, reflects a more than 20 percent increase since fiscal 2017. Recent tax gains are due to commercial and retail development and to lesser extent valuation increases of existing property.”