Top-tier Credit Rating Agency Fitch says Riverside County has a Positive Fiscal Outlook

By: Sharjeel Sohaib

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Oct 5, 2022

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Fitch Rating

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Fitch Ratings gave Riverside County, California (the county) the following obligation an “F1+” rating on 23rd September 2022: β€”–$84,100,000 Riverside County 2022A teeter obligation notes (notes).

Key Findings:

Fitch has also confirmed the following ratings on county obligations: 

  • Issuer Default Rating (IDR) at “AA-,” 
  • Riverside County Pension Obligation Bonds (POBs), Series 2005A at “A+,” 
  • Riverside County Asset Leasing Corporation (CORAL) Lease Revenue Bonds (LRBs), Series 1997A at “A+,” 
  • Riverside County Public Financing Authority, LRBs, Series 2015 at “A+,” Riverside County 2022 TRANs at “F1+,”
  • Teeter obligation notes, series 2021A at “F1+.”

We Covered this in our Weekly Wire Roundup

What are the Main Rating Drivers for Riverside County? 

The long-term bonds’ rating outlook is positive.

Fitch used the following key indicators to assign rankings to Riverside County: 

Income Framework: “a”

Given the county’s mix of operating income, general fund receipts growth has been above inflation but below that of the US economy, and Fitch anticipates this tendency to continue.

Framework for Expenditures: ‘aa.’

Given the financial position of the state pension schemes in which the county participates, carrying costs for debt and retiree benefits are in the modest range, but they might increase.

The burden of Long-Term Liability: ‘aa.’

Fitch predicted that the county’s debt and pension load, overlapping debt, may remain mild regarding personal income.

Operating Performance: ‘aa.’

The county maintains a very high gap-closing capacity, as shown by sound reserve levels, sound spending flexibility, and moderate predicted revenue volatility.

Analysis

The county’s ‘AA-‘ IDR correlates to the short-term ratings of ‘F1+’ on the 2022 teeter obligations. Overdue tax receipts, general fund resources, and borrowable funds cover debt servicing.

Positive Outcomes and Improvements of Riverside after COVID.

The country’s high-income growth, flexible spending, moderate liabilities, and good gap-filling capabilities contribute to the ‘AA-‘ IDR. 

The county had trouble keeping regular revenue and expenses in check before the epidemic. As a result of a large federal stimulus package and better-than-anticipated revenue performance during the epidemic, the government enjoyed solid financial success in fiscal years 2021 and 2022.

Fitch anticipates that the county will continue managing its budget to preserve financial balance.

The Positive Outlook (updated from Stable Outlook in June 2022) continues to reflect the better financial outlook due to recent significant revenue growth and a leveling off of rising costs for the operations of Riverside University Health System and a healthcare settlement for inmates.

These liabilities are given an “A+” rating due to the somewhat increased flexibility associated with paying POBs and lease obligations.

Economic Base and Stability of Riverside County.

Due to its relative affordability, capacity for extra development, proximity to employment centers like San Bernardino, Orange, and Los Angeles Counties, and location along significant distribution routes, Riverside County’s economy remain well-positioned for long-term population and economic growth. 

Amazon, Nordstrom, and United Parcel Service are among the top taxpayers, which is indicative of the county’s expansion of distribution centers that support the increase in online sales. 

Current Developments in the County

As one of the worst-affected regions in the nation during the Great Recession, the county experienced significant housing market and tax base volatility. 

Yet, through fiscal 2022, both the housing market and taxable assessed values (TAVs) improved. The sizable state and federal revenue in the budget tend to moderate the effect of this periodicity on revenues.

The county is still recovering from the modest effects and mitigating measures of the coronavirus pandemic. Property taxes, which have risen in tandem with values, are the country’s primary source of discretionary income.Β 

With the commencement of the pandemic at the end of fiscal 2020, the county’s other produced income (unincorporated sales taxes and more revenues driven by economic activity, such as permits and charges for services) decreased. 

Riverside county has currently taken the following aspects under consideration: 

  • Infrastructure. 
  • Housing and homelessness. 
  • Neighborhood redevelopment. 
  • Economic recovery. 
  • Non-profit support and childcare. 

Additionally, in fiscal 2022, the county received $10 million in income backfill from ARPA, which it utilized to pay for government services.

Wrap Up!

Riverside County got new fiscal ratings based on crucial rating factors. The county’s ‘AA-‘ IDR aligns with the 2022 teeter obligations’ short-term ratings of ‘F1+’. 

According to Fitch, the county will keep controlling its spending to maintain its financial balance. 

During the pandemic, Riverside County was one of the worst-hit areas in the country. The county is still recovering from the minor impacts and mitigation actions of the coronavirus pandemic.

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