Fitch Ratings has affirmed its rating on Modesto’s 2008 General Fund Lease Revenue Bonds by granting a rating of ‘A+‘ and assigning the Rating Outlook as Stable.
The report affirmed the cities implementation of further cost cutting measures resulting in a small operating surplus in fiscal 2012 and a manageable deficit projected for fiscal 2013. Most notably, the city gained significant labor concessions through pension and OPEB reforms, which reduce the city’s long-term liabilities and ongoing contributions both for existing and new employees.
Despite operating within a stressed economy, the city successfully maintained its total general fund balance above 10% of spending throughout the recession, owing to proactive and prudent expenditure management. With the economy now turning around, the additional breathing room has allowed the city to restore some services and give salary increases which had been previously deferred. Fitch believes the city will increase its expenditures cautiously while keeping satisfactory reserve levels.