OREANDA-NEWS. Fitch Ratings affirms the 'A' rating on the following Pleasant Hill Recreation & Park District, California (the district) bonds:

--$18.8 million general obligation (GO) bonds, election of 2009, series A (2010).

The Rating Outlook is Stable.

SECURITY
The bonds are general obligations of the district, supported by the levy of ad valorem taxes on all taxable property within the district, without limitation as to rate or amount.

KEY RATING DRIVERS

STABLE FINANCIAL PERFORMANCE: The district has maintained stable finances with modest fund balances over the last several years following completion of a substantial capital improvement program.

LIMITED REVENUE FLEXIBILITY: Property taxes account for more than half of general fund revenues and growth is limited under California's Proposition 13. User fees for recreation programs provide the majority of non-tax revenues, but increases are somewhat constrained by market factors.

STRONG ECONOMY: The district benefits from a resilient economy and substantial tax base that outperformed the state and nation during the last recession. Wealth and income levels are above average and employment growth continues to be robust.

MANAGEABLE DEBT LEVELS: The district's 2010 GO issuances increased outstanding debt substantially but direct and overlapping debt levels remain moderate due to limited borrowing in prior years.

RATING SENSITIVITIES

FINANCIAL PERFORMANCE KEY: Failure to maintain general fund operating balance and satisfactory financial flexibility would increase downward pressure on the rating. A sustained improvement in reserves and cash balances could support upward rating movement.

CREDIT PROFILE

The district is located 45 miles east of San Francisco in suburban Contra Costa County and was formed in 1951. District boundaries include the city of Pleasant Hill as well as portions of two adjacent cities and unincorporated areas.

STABLE FINANCIAL PERFORMANCE

The district achieved a fourth consecutive year of positive operating results in fiscal 2015, with improving cash levels and modest but stable reserves. General fund cash balances rose to approximately $2 million at the end of fiscal 2015, equivalent to 3.6 months of operating expenditures. Unrestricted fund balances increased to $1 million, or 13.9% of general fund spending. The increase in fund balance for 2015 follows a small decline in 2014 resulting from one-time spending on capital.

The district's recent stable finances follow its completion of a substantial bond-funded capital facility replacement program. New facilities have increased demand for the district's recreational programs and have also allowed for improved cost recovery. No major changes in the district's operations are anticipated for fiscal 2016 or beyond, and Fitch expects the district's finances to remain stable over the next several years.

LIMITED REVENUE FLEXIBILITY

The district receives a fixed share of the 1% countywide property tax levy, which provides approximately half of general fund revenues. Tax growth is limited under Proposition 13, and the district relies on user fees for the majority of non-tax revenues. Although the district has broad discretion to adjust such fees, the availability of similar services in neighboring jurisdictions can present an obstacle to rate increases. Management expects that future budget balancing efforts, to the extent required, would address the district's service offerings to reduce subsidies for higher cost programs.

RESILIENT ECONOMY AND TAX BASE

The district benefits from a resilient economy and substantial tax base. Taxable assessed values (TAVs) declined by a modest 2.4% between 2009 and 2012 but recorded compound annual growth rates of 4.5% over the following four years. General fund revenue performance has also been strong, with compound annual growth of 9.7% over the past five years from both rising property values and user fees. Home values reported by Zillow.com increased by 8.7% year-over-year as of December 2015, which will likely support further property tax growth in subsequent years.

The October 2015 unemployment rate of 3.9% for the city of Pleasant Hill was well below the state and national averages of 5.7% and 4.8%, respectively. Wealth and income levels for this largely residential community are 130% to 150% of state and national figures, and assessed value per capita is notably high at $199,000.

MANAGEABLE LONG-TERM OBLIGATIONS

Overall debt levels are moderate at approximately 2.3% of TAV. Carrying costs for debt service and retiree benefits are elevated at 25% of 2015 governmental expenditures, largely due to the district's recent debt issuances. Amortization is slow with 36% of outstanding principal scheduled for repayment over the next 10 years.

The district participates in a state-sponsored pension plan and faces ongoing increases in contribution rates over the next several years to address sizable unfunded liabilities and revised actuarial assumptions. The district reported a net pension liability of approximately $3 million in fiscal 2015 and provides no other post-employment benefits.