OREANDA-NEWS. Fitch Ratings upgrades the following ratings for Boise City, Idaho (the city):

--$21.9 million revenue refunding bonds series 2011A to 'AAA' from 'AA+';

--Issuer Default Rating (IDR) to 'AAA' from 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are supported by general revenues and constitute a first lien on the city's general fund, with priority over any and all other obligations and liabilities, subject to any additional parity obligations.

KEY RATING DRIVERS

The rating upgrade to 'AAA' reflects the application of Fitch's revised criteria for U. S. state and local government credits, which were released April 18, 2016. The revised criteria provide for greater consideration of the stability of the city's revenues despite economic volatility and the independent legal ability to increase property taxes to offset a recessionary revenue decline.

Economic Resource Base

Boise is the capital of Idaho and a regional economic center. Knowledge-based businesses are especially prominent among the city's major employers and have helped attract a highly educated workforce.

Revenue Framework: 'aaa' factor assessment

Revenue growth has exceeded both inflation and U. S. economic performance over the past 10 years and Fitch expects such trends to continue due to sustained property tax growth. The city also retains considerable legal ability to raise revenues to offset minimal expected revenue volatility, despite a cap on tax rates.

Expenditure Framework: 'aaa' factor assessment

Spending growth appears likely to be in line with revenue growth. Flexibility is supported by modest carrying costs for long-term liabilities as well as strong management control over labor costs.

Long-Term Liability Burden: 'aaa' factor assessment

Long-term liabilities are low relative to the city's resource base and appear likely to remain affordable.

Operating Performance: 'aaa' factor assessment

The city has demonstrated superior gap closing ability and maintains a high degree of financial flexibility.

RATING SENSITIVITIES

IDR SENSITIVE TO FINANCIAL PERFORMANCE: The 'AAA' IDR could come under downward pressure if the city fails to maintain satisfactory financial flexibility, including reserves sufficient to address periodic economic volatility.

CREDIT PROFILE

Boise's economy continues to experience solid growth following a sharp downturn during the last recession. Unemployment rates are notably low, and construction activity is high, contributing to steady revenue gains for the city's general fund.

Revenue Framework

Property taxes provide nearly two-thirds of general fund support. Tax rates on existing properties may be increased annually by an amount sufficient to increase the levy by 3%, in addition to taxes on new construction, and the city routinely approves such increases.

Overall revenue growth has outpaced inflation and U. S. economic performance over the past 10 years, largely due to steady increases in property tax revenues. Fitch expects that ongoing additions to the city's property tax base and annual increases of the tax levy will result in continued strong revenue growth.

The city's authority to impose a 3% levy increase is limited by a cap on the overall property tax rate. Management estimates that the city's assessed value would have to decline by nearly 14% before reaching this cap, which could constrain the city's ability to capture the full 3% increase.

Expenditure Framework

Public safety accounts for a little more than one-half of general fund expenditures. Parks and recreation, libraries, and community services collectively represent about one-third of such costs.

Spending growth has historically been in line with the city's revenue growth and the city has consistently generated operating surpluses. Based on the city's record of healthy revenue growth, Fitch expects that future expenditure growth will be in line with revenues.

The city's carrying costs for debt service and retiree benefits are low and represented less than 9% of governmental expenditures in fiscal 2015. Management control of labor costs is also strong given Idaho's statutory limits on collective bargaining for public employees. Based on these attributes, Fitch considers the city to have strong flexibility over its main expenditure items.

Long-Term Liability Burden

The city participates in two adequately funded state pension plans and the combined burden of overall debt and unfunded pension liabilities is low relative to the city's resource base. Fitch expects liabilities to remain low based on the limited use of debt financing historically as well as adequate existing funding of retiree benefits.

Operating Performance

The city is well-positioned to withstand a moderate economic recession. Reserve levels are high relative to historic revenue volatility and the city also retains substantial flexibility to reduce expenditures.

The city has regularly achieved operating surpluses before transfers for capital projects, and added to reserves following the last recession. Budget management is conservative and the city has redirected recent pension savings to finance voter-approved capital projects in lieu of implementing an authorized levy for debt service.