OREANDA-NEWS. Fitch Ratings affirms the following ratings on Parma, OH (the city) bonds:

--\$700,000 (est.) outstanding park acquisition general obligation unlimited tax refunding bonds (ULTGO), series 2013 at 'AA-';

--\$13,400,000 (est.) outstanding limited tax general obligation bonds (LTGO), series 2013, 2006, 2005, 2000 and 1999 at 'A+'.

--The Rating Outlook is Stable.

SECURITY

The ULTGO bonds are secured by the city's full faith and credit and its ad valorem tax, without limitation as to rate or amount.

The LTGO bonds are secured by the city's full faith and credit and its ad valorem tax, subject to the 10-mill limitation.

KEY RATING DRIVERS

STABLE ECONOMY: Three healthcare facilities and a community college add a degree of stability to the local economy despite slow, long-term population decline. The largest employer, General Motors, has rebounded since the recession with the city's facility experiencing increased operations and significant investment in the plant's equipment.

RELIANCE ON INCOME TAX: The city's finances are reliant on income tax revenues, which fluctuate with economic cycles. These revenues have been fairly stable over the last few years, but leave the city vulnerable during downturns.

ADEQUATE RESERVE LEVELS: Stable income tax receipts over the last few years combined with pro-active expenditure control have resulted in adequate reserve levels that should provide an adequate buffer in the next downturn.

MANAGEABLE DEBT PROFILE: City debt levels are low, debt is rapidly amortized, and future capital needs are minimal. Carrying costs associated with debt service, pension and other post-employment benefits (OPEB) are manageable.

LTGO RATING DIFFERENTIAL: The 'A+' rating on the LTGO bonds reflects the general credit characteristics of the city as well as its limited taxing capacity related to the LTGO bonds.

RATING SENSITIVITIES

MAINTENANCE OF ADEQUATE RESERVES: Given the city's reliance on economically sensitive income taxes, continued active expense control and the maintenance of adequate financial reserves will be key to rating stability.

CREDIT PROFILE

The city is located in Cuyahoga County (LTGOs rated 'AA+'; Outlook Stable), eight miles south of downtown Cleveland. The city's estimated population is 80,500. Population declined by 4.7% from 2000 to 2010 and more recently by 1.4% from 2010 to 2013.

STABLE ECONOMIC CHARACTERISTICS

The local economy is primarily anchored by a General Motors (GM) stamping plant, the largest employer with approximately 1,400 workers. Positively, operations at the facility are healthy - GM invested \$38 million in equipment in 2013-2014, has three round-the-clock shifts and has added 30 new jobs. Three health care facilities, a community college and other government sector employment lend stability to the area economy. The January 2015 unemployment rate of 6% was comparable to the state and U.S. rates of 6.1%, and lower than the city's 7.4% rate in January 2014 as employment growth of 1.2% outpaced a small increase (0.38%) in the labor force. City income levels as measured on a 2013 per capita income basis are slightly lower than the state and nation; the poverty level is significantly below.

Assessed valuation has stabilized after declining 11.3% in 2013 due to a county-wide sexennial reassessment. Fitch expects assessed value to remain stable to modestly increasing given some ongoing commercial development and a rebounding housing market. The property tax base is diverse with the top 10 payers comprising 4% of assessed valuation. Total property tax collections are a bit weak, averaging 96% over the last three years. The city is somewhat insulated financially from assessed value declines as property taxes only account for about 8% of general fund revenues.

Ohio law establishes a maximum tax rate of 10 mills for all overlapping taxing units, without a vote of the people. Parma's total millage is currently 7.1 mills, 3.4 mills of which is the city's share subject to the statutory cap. The city must depend on voter approval for a portion of its ongoing revenue, but has a good track record of approval for renewal levies. In November 2014, a 1.5 mill fire levy was increased to 2 mills and renewed through 2018 (approximately \$3 million annually). The only other renewable levy is a five-year 2 mill police levy which is up for voter renewal in 2017.

INCOME TAX RELIANT; ADEQUATE RESERVES

General fund operations are primarily supported by the city's 2.5% income tax which yields over 60% of general fund revenues. Income tax revenues declined by about 9% in 2009, reflecting workforce reductions at GM, but have improved over the last four years as GM operations have rebounded. Fitch views the city's dependence on this plant for revenues as vulnerable even though the plant is currently doing well.

The city has been able to align expenditures with revenues negatively affected by the economy and a reduction in local government funds (LGFs) from the state. These have included the implementation of furlough days in 2010 through 2012. Additionally, a hiring freeze continues to be in place.

After recording three consecutive years of general fund surpluses after transfers in 2009 through 2011 (year-end Dec. 31), small deficits of \$942,000 (2% of spending) and \$447,000 (1% of spending) were reported in 2012 and 2013, respectively. The unrestricted general fund balance totaled a satisfactory 12.2% in 2012 and 11.4% in 2013. For 2014, management is estimating a small general fund surplus. The 2015 budget is up 2% from the prior year. Consistent with prior years, the budget assumes the use of nearly all of the fund balance. Given management's history of conservative budgeting, Fitch expects the 2015 year-end general fund balance to significantly exceed budget. Additionally, due to the city's exposure to income tax fluctuations, Fitch expects reserves to at least remain stable if not improve during this up part of the economic cycle.

MANAGEABLE DEBT PROFILE

Fitch views the city's debt profile as a credit positive. Debt per capita and debt to full value are modest at \$559 and 1.15%, respectively. Fitch expects debt levels to decline as amortization is very rapid with 96% of principal retired within 10 years, future debt issuance is minimal, and a portion of the city's income tax (21%) is dedicated to capital improvements.

The city participates in and continues to make 100% of its annual statutorily required contributions to multiple-employer, cost-sharing state plans to fund both pension and other post-employment benefits. However, the contribution levels fall short of the actuarially-determined rates. The largest, the Ohio Public Employees Retirement System, reported a funded ratio of 80.9% as of Dec. 31, 2013. Using Fitch's more conservative 7% rate of return, the estimated funded ratio is 73%. Carrying costs for debt service, pension and OPEB are manageable at 18.8% of government fund expenditures.