OREANDA-NEWS. Fitch Ratings has affirmed Menlo Park, CA's (the city) bonds as follows:

--\$10.3 million general obligation (GO) bonds, series 2009A and 2009B (federally taxable) at 'AAA'.

The Rating Outlook is Stable.

SECURITY
The bonds are supported by an unlimited ad valorem tax levied on all taxable property in the city.

KEY RATING DRIVERS

STRONG ECONOMY AND TAX BASE: The city benefits from a strong regional economy, with substantial ongoing employment growth and investment in the high technology sector. Taxable assessed values (TAV) increased throughout the last recession and continue to show strong gains.

HEALTHY FINANCIAL POSITION: Reserve levels remain high, offsetting potential revenue volatility. Recent revenue growth has been robust, outpacing growth in expenditures.

MANAGEABLE LONG-TERM OBLIGATIONS: Overlapping debt levels are low relative to TAV but elevated on a per capita basis. Carrying costs for debt and retiree benefits are affordable. The city relies primarily on accumulated reserves to finance capital needs.

RATING SENSITIVITIES
The rating is sensitive to shifts in fundamental credit characteristics. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.

CREDIT PROFILE
Menlo Park has a population of approximately 33,000 and is located midway between San Francisco and San Jose, adjacent to Stanford University. The city is primarily a residential community but also includes substantial employment in the technology sector, most prominently the new headquarters of Facebook.

STRONG ECONOMY AND TAX BASE
Menlo Park is situated in the heart of Silicon Valley and benefits from the technology industry's substantial levels of investment and ongoing wealth generation. Many of the nation's most prominent technology companies are headquartered in the region, which has also achieved fame for its ability to attract startup businesses.

The city's economy has benefited directly from the presence of the technology industry with increasing employment levels and a growing tax base. Total employment rose by 3.6% in 2014, well above the pace of state and national growth. Unemployment rates remain well below state and national averages and dipped to 2.8% in December 2014. TAV experienced steady improvements throughout the last recession and median home values reported by Zillow.com have increased by 60% over the past three years, rising to \$1.7 million. Taxpayer concentration is low.

HEALTHY FINANCIAL POSITION
The city's financial operations have been consistently strong. The unrestricted general fund balance rose to a high \$26.9 million or 66% of spending at the end of fiscal 2014. Revenue collections dipped slightly during the recent recession but have subsequently rebounded, achieving a 6.9% compounded annual growth rate over the past five years. Expenditure growth has been relatively subdued over this same period, rising at a 2.6% compounded rate. Increasing wage pressures may push expenditure growth higher over the next several years, but the city's strong multi-year planning framework appears to position it well for monitoring and addressing any potential challenges to operating balance.

The city also benefits from exceptional revenue flexibility for a California city. Local voters approved an ongoing increase to the city's transient occupancy tax in November 2012 that in combination with higher occupancy rates has contributed to a \$1.1 million improvement in such revenues through fiscal 2014. In addition, an agreement with Facebook provides \$800,000 per year in unrestricted revenues. The city also retains the option of a voter-approved but unimplemented increase in its utility users tax rate.

PRUDENT FINANCIAL MANAGEMENT
The city has utilized its strong financial position to minimize borrowing and reduce long-term liabilities. The city fully funded its other post-employment benefit (OPEB) liability in fiscal 2008, and pre-paid \$7 million of pension costs for public safety employees from general fund reserves in fiscal 2011. In addition, the city maintains a longstanding practice of dedicating more than \$2 million per year of general fund revenues to capital needs.

MANAGEABLE LONG-TERM OBLIGATIONS
The city's direct debt burden is low, reflecting its use of internal resources to finance a large portion of its capital plan. Including overlapping entities, overall per capita debt is high at \$9,291, due largely to school debt, but is offset by very high wealth levels. Relative to the city's substantial tax base, overall debt is moderate at 2.6% of taxable assessed value. Debt amortization is slow, with 29% of outstanding debt retired in 10 years. Total carrying costs for debt service and retiree benefits accounted for an affordable 11% of governmental expenditures in fiscal 2014.