OREANDA-NEWS. S&P Global Ratings raised its long-term rating and underlying ratings (SPUR) to 'AA-' from 'A+' on the City of New Orleans' general obligation (GO) debt outstanding. The outlook is stable.

At the same time, S&P Global Ratings assigned its 'AA-' long-term rating and stable outlook to the city's series 2016 GO refunding bonds.

"We base the upgrade on our view of New Orleans' improvement in current and projected economic wealth and income levels and total available reserves as a percent of expenditures," said S&P Global Ratings credit analyst Jennifer Garza.

The city's full faith, credit, and resources, as well as an agreement to levy ad valorem property taxes without limitation as to rate or amount, secure these bonds. This tax revenue is immediately segregated and paid to the Board of Liquidation, which is responsible for depositing, investing, and reinvesting such receipts and for paying debt service on the city's GO debt. In the event that tax revenue dedicated to the payment of debt service is insufficient, the Board of Liquidation may use funds on hand that are not dedicated to other purposes, and is empowered to levy an additional tax to cover such deficiency. The statutory provisions authorizing the bonds provide that the Board of Liquidation shall continue while any of the city's GO bonds are outstanding and unpaid and that its powers with respect to payment of the GO bonds shall not be diminished.

Officials will use the series 2016 GO bond proceeds to refund a portion of the city's existing debt for savings.

The rating reflects our view of the city's:Strong economy, with access to a broad and diverse metropolitan statistical area (MSA); Strong management, with "good" financial policies and practices under our financial management assessment (FMA) methodology; Adequate budgetary performance, with operating results that we expect could deteriorate in the near term relative to fiscal 2015, which closed with balanced operating results in the general fund and an operating surplus at the total governmental fund level; Strong budgetary flexibility, with an available fund balance in fiscal 2015 of 12.3% of operating expenditures; Very strong liquidity, with total government available cash at 16.3% of total governmental fund expenditures and 124.9% of governmental debt service, and access to external liquidity we consider exceptional; Very weak debt and contingent liability position, with debt service carrying charges at 13.1% of expenditures and net direct debt that is 95.7% of total governmental fund revenue, as well as a large pension and other postemployment benefit (OPEB) obligation and the lack of a plan to sufficiently address the obligation; and Very strong institutional framework score. The stable outlook reflects our expectation that we will not change the rating during the two-year outlook horizon. We believe New Orleans will maintain at least strong budgetary flexibility with at least adequate budgetary performance, based on recent increases in assessed value and commercial retail expansion, which should allow for growth in general fund revenue collections.

A higher rating is possible if the city were to increase available reserves and maintain them at levels we consider very strong as a percent of expenditures while sustainably increasing wealth. In addition, if New Orleans were able to improve the funding of its pension obligations to 100% of the ARC along with the funding levels of administered plans to an adequate level, we could further raise the rating.

A lower rating is possible if available general fund levels fall materially and short of officials' goal of 10% of operations by 2020.