OREANDA-NEWS. Fitch Ratings has assigned an 'AA' rating to the following Sunrise, FL (the city) bonds:

--\$40 million general obligation (GO) bonds, series 2015.

The bonds are the first series of a \$65 million authorization which is scheduled for sale on Feb. 10 via competitive bid. Proceeds will be used to finance new parks and recreation facilities, including land acquisition.

The Rating Outlook is Stable.

SECURITY
The bonds are general obligations of the city payable from ad valorem taxes levied without limitation as to rate or amount, upon all taxable property within its corporate limits.

KEY RATING DRIVERS

STRONG FINANCIAL POSITION: City finances are conservatively managed, characterized by elevated reserves and ample liquidity. The availability of surplus utility funds to support operations further enhances financial flexibility.

DIVERSIFIED ECONOMIC BASE: Economic activity is driven by tourism and a significant corporate presence. Both employment and assessed value continue to grow following a severe recessionary contraction. Employment now exceeds 2008 levels.

PENSION CONCERNS BALANCED BY LOW DEBT: The city's combined unfunded pension liability is double its low debt burden. Fitch expects debt levels to remain low but carrying costs for debt and pensions to rise given the pensions' weak funded status and above average budget burden. Continued full actuarial payments for the three largest plans and contemplated reforms if executed should slowly reduce the liability.

RATING SENSITIVITIES

STABLE OUTLOOK: The rating is sensitive to shifts in fundamental credit characteristics, including the city's strong financial management practices and maintenance of ample reserves. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE
The city encompasses 18 square miles located in southeastern Florida in Broward County, approximately six miles west of Fort Lauderdale. City residents total an estimated 90,000, up about 7% from 2000, making it the 26th largest city in Florida.

DIVERSE ECONOMY REBOUNDS
The city's economic base consists of a sizable corporate presence due to four major industrial parks, financial services, research and development and a robust tourist sector. Tourism is driven in large part by the Sawgrass Mills Mall (the mall) and the BB&T Center (home of the National Hockey League Florida Panthers). The mall is the largest outlet mall in the U.S. and Florida's second largest tourist attraction next to Disney World. Numerous corporations are located within the city including leading employers United Healthcare, Mednax and General Dynamics.

The local economy is experiencing substantial development activity. Fiscal 2014 building permits were up 18.5% year over year and represent about \$150 million of construction projects. Projects include expansion of the mall and substantial commercial and residential development.

EMPLOYMENT RECOVERS PREVIOUS LOSSES
Jobs have rebounded briskly following the loss of over 13% of the city's employment base between 2007 and 2010. Employment has increased every year since 2010, recovering all of the prior losses. November 2014 employment was up 4.6% year over year pushing unemployment down to 4.8%, below the state and national averages.

The housing market is also recovering from a precipitous recessionary decline. Housing values are up 19% over last year, according to Zillow.com but remain well below their pre-recession peak. Assessed valuations are benefitting from the housing comeback with annual increases of 4% and 7.2%, respectively in fiscals 2014 and 2015. These gains follow a sustained recession-fueled contraction totaling 28% between 2008 and 2012.

STRONG FINANCIAL FLEXIBILITY
A factor supporting the 'AA' rating is Fitch's expectation that the city will maintain its long practice of conservative budgeting supporting a strong financial profile and demonstrated flexibility. City finances have been well-managed characterized by large reserves, strong liquidity and active use of excess reserves for one-time capital contributions.

Fitch also views as a credit positive the funding support provided by the city's combined water, wastewater and natural gas system (utility revenue bonds rated 'AA' with Stable Outlook by Fitch) to general operations. The elevated balances and availability of funds from the utilities have afforded the city considerable financial flexibility. Utility transfer amounts have historically been based on 2.5% of prior year gross utility fund revenues.

In fiscals 2013 and 2014, management temporarily raised utility transfers to \$11 million in part to support a \$35.5 million refunding of the city's series 1992B public facilities revenue bonds with current funds. The transfers represented a somewhat elevated 9% of total general fund revenues and 10% of utility revenues. Operating performance remained strong, evidenced in only a \$15.3 million general fund balance draw. Despite the drawdown, general fund reserves remained ample with the unrestricted fund balance at \$47.3 million representing 34% of general fund expenditures.

2015 utility transfers were reduced to a more typical level of 2.5% to 5% of utility revenues. Fitch expects transfers to remain moderate and that future increases above the norm will be on an exception basis.

Unaudited results for fiscal 2014 show a \$15.4 million general fund operating surplus (after transfers), well above the \$4.1 million budgeted. The city budgets very conservatively, with results typically outperforming budget. These results bring unrestricted general fund balance up to \$60 million or a robust 55% of spending. Liquidity levels are extensive with fiscal 2014 unrestricted cash and investments equivalent to nearly eight months of operations.

The adopted fiscal 2015 budget proposes a \$14 million general fund use of reserves for one-time costs. The budgeted ending general fund balance of \$54 million would equate to a still-healthy 42.7% of spending, well above the city's reserve requirements of 15% to 25% for contingencies and 5% as a stabilization reserve.

PENSION LIABILITY SHOULD REDUCE
Management maintains three defined benefit (DB) pension plans including plans for general employees, police and fire fighters and one defined contribution plan. The combined \$243 million unfunded actuarial liability (3% of market value in fiscal 2013) assuming Fitch's 7% discount rate should slowly reduce as the city maintains annual actuarial funding. Utilizing Fitch's assumptions, funded ratios based on 2013 valuations for the DB plans are weak at 57.1% for general employees, 51.4% for police officers and 55.9% for firefighters.

Fiscal 2013 pension costs consumed an above-average 15% of general fund spending. While plan modifications have been implemented in recent years to achieve savings, management recognizes that pension funding remains a key issue. In September 2014, a city-commissioned actuarial report of the city's pension plans estimated future costs to the city under a number of different funding scenarios. Management has indicated that these considerations will be part of upcoming union negotiations. Fitch considers the status of the pension plans to be an important rating factor and will monitor the city's progress towards reducing its liability.

Other post-employment benefits (OPEB) include options for city retirees to participate in the city's insurance programs for medical insurance, life insurance and long term care insurance. Retiree costs for life insurance and long term care are fully subsidized while employees are responsible for the costs of the medical plan. The city funds these other post-employment benefits on a pay-go basis at less than 1% of governmental spending. The plan's unfunded actuarial accrued liability of \$20 million represented a negligible 0.2% of the city's market value.

MINIMAL DEBT LOAD
Debt metrics are low as exhibited by a debt to market value of 1.57% and debt per capita of \$1,432. The proposed GO bonds will be the city's only debt payable from city-wide taxes. Payout is somewhat sluggish with less than 42% of principal retired within the next 10 years.

Debt levels are expected to remain modest as five year capital plans are manageable and the only planned debt at this time will be the remaining \$25 million of the city's \$65 million GO authorization. These bonds will likely be issued within the next two or three years. Management is also considering the issuance of bonds for a new city hall but the amount and timing have not yet been determined. The city's combined costs of debt service, pensions and OPEB contributions are moderate, accounting for 18% of general government spending.