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

--$21.9 million revenue refunding bonds series 2011A at 'AA';
--Implied unlimited tax general obligation (ULTGO) rating at '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

STABLE FINANCES: The city has maintained balanced operations and a strong financial position throughout the business cycle, due both to steady revenue growth and prudent adjustment of expenditures. Capital expenditures are funded from current resources and fund balances remain healthy.

REVENUE LIMITATIONS: Local property taxes account for the majority of general fund revenue and are subject to restrictions on annual growth. Continued revenue increases are dependent on growth in the underlying tax base as a result of a tax rate limit that the city approached during the last recession.

VOLATILE ECONOMY ON UPSWING: Boise's economy is in the midst of a strong recovery following a sharp downturn during the last recession. Unemployment rates are notably low, and home values have experienced steady gains.

LOW DEBT LEVELS: Overall debt levels are low, amortization is rapid, and liabilities for retiree benefits are manageable.

RATING SENSITIVITIES

STRONG FUNDAMENTALS: The rating is sensitive to shifts in the city's financial position and resilient economy. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely over the next several years.

CREDIT PROFILE
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. The city has a population of approximately 214,000 residents and has experienced above-average growth.

STABLE FINANCES
The city's financial position is healthy and has benefited from both stable revenues and management controls on spending growth. The city regularly achieves substantial operating surpluses before transfers, and funds most capital needs from current resources. Unrestricted fund balances rose to 17.1% of general fund spending in fiscal 2014. Management projects a substantial operating surplus for fiscal 2015, which Fitch considers reasonable based on the city's strong track record.

REVENUE LIMITATIONS
Boise's finances are supported by a property tax system that allows for annual revenue increases of up to 3%, plus new construction, subject to a tax rate cap of $9.00/$1,000 of assessed value (AV). Property tax accounted for 63% of general fund revenues in fiscal 2014, making such provisions a key credit consideration for the city. General fund revenues rose steadily through the recent downturn, largely on the basis of continuing property tax growth.

The city's tax rate cap presents a potential challenge to future growth and more generally to the city's operating balance. The large drop in AV during the downturn caused tax rates to rise by 65% before renewed AV growth in fiscals 2014 and 2015. Management estimates that the city could withstand a 14.4% decline in AV before reaching the cap. The city appears unlikely to do so in the near future, but material AV losses have the potential to impact future general fund revenues.

VOLATILE ECONOMY ON UPSWING
Boise experienced a sharp contraction during the last recession, losing 20% of its jobs and 29% of its property tax base, but its economy has improved steadily over the past several years. Employment levels have increased on a year-over-year basis for 66 consecutive months and the city's 2.4% unemployment rate as of May 2015 was well below the 5.3% U.S. average. Construction activity, a major contributor to pre-recession growth, has also strengthened with ongoing increases in permit activity. Home prices have generally lagged other indicators but as of August 2015 were 41% above their 2011 low, although still 18% below their pre-recession peak.

LOW DEBT LEVELS
Overlapping debt levels are low at 1.1% of market value. Amortization is rapid with 74% of outstanding principal retired in 10 years. In addition to the rated bonds, the city issued $17 million of voter-approved, private placement GO debt in fiscal 2015 to fund various capital needs. Management has committed to voters to fully fund debt service from a recent and substantial reduction in its contribution requirements for a legacy pension plan.

The city participates in a state-sponsored pension plan with a Fitch-estimated funded ratio of 88.1% under an assumption of 7% investment returns. OPEB liabilities are low as a result of limited benefits. Carrying costs for debt service and retiree benefits were manageable in fiscal 2014 at 15.9% of governmental expenditures, but appear likely to decline with the recent reduction in the city's contribution requirements.