OREANDA-NEWS. Fitch Ratings has affirmed the ratings on Rocklin, California's (the city) outstanding obligations as follows:

--Approximately $1.5 million Rocklin Public Financing Authority certificates of participation (COPs) series 2003 at 'AA+';
--Implied general obligation rating (GO) at 'AAA'.

The Rating Outlook is Stable.

SECURITY

The certificates are secured by the city's covenant to budget and appropriate lease payments for beneficial use and occupancy of governmental facilities under a standard lease-leaseback transaction. Additional security is provided through a debt service reserve surety and two years of rental interruption insurance up to an amount equal to maximum annual debt service in either year.

KEY RATING DRIVERS

STRONG FINANCIAL RESERVES: Financial reserve levels remain very strong and are supported by increasing revenues.

MODERATE DEBT PROFILE: The city's direct debt burden is low and overall debt is moderate. The pace of direct debt amortization is rapid and future capital needs are minimal.

RESILIENT LOCAL ECONOMY CONTINUES TO GROW: The city's local economy, while slowed by the recession, has remained strong relative to the struggling Sacramento MSA (the MSA). Housing prices have recovered much of the value lost in the recession, and increased residential and commercial development have both driven tax base growth and bolstered sales tax revenues.

APPROPRIATION AND ABATEMENT CONSIDERATIONS: The one notch rating distinction for the COPs from the city's implied GO rating reflects the annual appropriation and abatement risk.

RATING SENSITIVITIES

BALANCED OPERATIONS AND SOLID RESERVES: The current rating level assumes the city will address any future operating shortfalls while maintaining solid reserves. Failure to do so could pressure the rating.

CREDIT PROFILE

The city of Rocklin is located within Placer County, 22 miles northeast of the city of Sacramento. The city's current population is 60,344.

RESILIENT LOCAL ECONOMY CONTINUES TO GROW

Since the last recession, the city's economy has recovered and continues to trend upwards. Commercial and residential development reversed previous tax base declines and the city posted solid 6.5% and 8.6% gains in taxable assessed value (AV) for fiscal 2015 and 2016, respectively; the current taxable value is $7.8 billion.

The city's employment base has also been resilient. Recession-related employment losses were fewer than the surrounding MSA. Both employment and labor force figures have returned to pre-recession levels, resulting in an unemployment rate that is consistently below the county, MSA, state, and national averages.

The city has experienced significant population growth due to its relative affordability and proximity to the Sacramento region's employment base. While many residents take advantage of employment opportunities in the surrounding MSA, the local economy of the city benefits from several large local employers, with regional offices for Oracle and UPS, and higher education, with Sierra College and William Jessup University (all within the city limits).

STRONG FINANCIAL PROFILE

The city's financial operations have been consistently strong. The unrestricted general fund balance climbed to a high $32.0 million or 81% of spending at the end of fiscal 2014. Revenue collections fell slightly during the recent recession but have subsequently rebounded, as evidenced by a 4.8% compounded annual growth rate over the past five years.

Expenditures have grown by a similar rate over this same period at a 4.7% compounded rate. Growing pension costs may increase expenditures over the next few years, but the city's practice of planning for and making additional pension payments positions it well for addressing this potential challenge.

Continuing the trend of solid operating performance, fiscal 2015 unaudited results show a $788 thousand surplus, with unrestricted reserves at a still solid 74.1% of spending.
The fiscal 2016 budget assumes a reduction in general fund reserves due primarily to $600 thousand in expected street maintenance expenditures. However, the city expects actual results to exceed budgeted projections given anticipated revenue growth. Property taxes continue to benefit from higher AV, sales taxes appear likely to increase due to recently completed retail construction, and permits and business tax revenue have been boosted by ongoing development. .

MODERATE DEBT PROFILE

The city's overall debt profile is manageable. Direct debt levels are low but overall debt levels are moderate at $4,300 per capita due to sizable overlapping debt of local school and community facilities districts. The series 2003 COPs are secured by a lien on rental payments from the city for use of a police facility. The city's direct debt amortizes rapidly with 100% of outstanding debt scheduled for repayment within 10 years, while capital needs reportedly are minimal.

The city participates in the state pension plan, CalPERS, and historically has funded 100% of its annual required contribution; the contribution totaled $3.7 million in fiscal 2014. Due to expected increases in contribution rates, the city proactively made an extra payment to CalPERS of $952 thousand in fiscal 2015. The city plans to continue to make additional pension payments to reduce long-term pension liabilities going forward.

In 2014, the city established an OBEB trust fund with the California Employers' Retiree Benefit Trust (CERBT). The city transferred $2.2 million to the trust fund in fiscal 2015 and plans to transfer another $2.7 million in fiscal 2016. The city is working towards full actuarial funding of its OPEB obligations. It plans to pay at least 40% of the ARC in fiscal 2016 and to increase the contribution by 10 percentage points each successive fiscal year (up to fiscal year 2022).

Carrying costs for debt service and retiree benefits were manageable at 13.9% of fiscal 2014 governmental expenditures.