OREANDA-NEWS. Fitch Ratings has affirmed the following ratings on the city of High Point, North Carolina:

--$86 million outstanding general obligation (GO) bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the city backed by a pledge of its full faith, credit, and unlimited taxing power.

KEY RATING DRIVERS

STRONG FINANCIAL PROFILE: Conservative budgeting and careful monitoring of financial results contribute to a stable financial position and solid reserve levels.

DIVERSIFYING ECONOMY: The local economy, traditionally rooted in furniture and textile manufacturing, continues to diversify. However, employment has been slow to rebound and income levels are below the national average.

MODEST LONG-TERM LIABILITIES: Overall debt levels should remain moderate, given manageable additional issuance plans and the city's continued adherence to conservative debt policies. Overall carrying costs for long-term liabilities are low despite rapid amortization of debt.

RATING SENSITIVITIES

STRONG FINANCIAL MANAGEMENT: Fitch expects the city's sound financial position to remain stable over the next several years. The rating would be sensitive to any material weakening of the city's financial reserves.

CREDIT PROFILE

Centrally located in the Piedmont Triad region of North Carolina, High Point benefits from its location along the I-85/I-40 corridor as well as its proximity to the nearby Piedmont Triad International Airport. The city has exhibited steady growth in population at an average annual rate of 2% since the 2000 U.S. Census; the 2014 population is estimated at 108,629.

STRONG FISCAL POSITION

The city exhibits strong financial management with healthy reserve levels, high liquidity, and generally positive annual operating results. The fiscal 2015 general fund net operating surplus after transfers of $3.4 million, or 3.4% of spending, was attributable to better than expected sales tax revenues. The unrestricted general fund balance increased to $23.7 million or 23.8% of spending. The city's reserve by state statute, which is primarily to offset accounts receivable, is a source of additional financial flexibility not included in the unrestricted general fund balance. This reserve totaled $9.4 million at fiscal year-end 2015, or an additional 9.4% of spending.

The fiscal 2016 budget reduces the prior year's property tax rate by 1.4 cents to 65 cents per $100 assessed value (AV) and appropriates $2.8 million of general fund balance. The city retains considerable flexibility within the statutory $1.50 per $100 AV tax rate cap. Preliminary expectations for fiscal 2016 from city management are that operations will be balanced, citing sales tax revenues in excess of budget and savings on salaries which are conservatively budgeted at 100% filled positions.

TRANSITIONING ECONOMY

High Point and the cities of Winston-Salem and Greensboro form the Piedmont Triad, one of the faster-growing economic regions of the country. Known as the home furnishings capital of the world for almost a century, High Point is still host of the High Point Market, the world's largest international home furnishings trade show, which is held biannually and remains a crucial source of economic activity for the city.

The economy has expanded and the city has seen significant investments from companies in an array of industries, most notably Ralph Lauren and Volvo, which both continue to expand. Ralph Lauren recently completed construction on a $34 million facility and now employs 2,800 workers in the city. High Point University has more than doubled in size over the past eight years. The city's economy is diverse, with only one of the top 10 taxpayers related to furniture manufacturing after recent consolidation. The top 10 taxpayers represent a moderate 9.5% of taxable property value. The city's seasonally unadjusted unemployment rate in January 2016 was 5.7%, a slight improvement from 5.9% in January 2015.

Wealth levels in the city are below average, with per capita income at 91% of the state and 81% of the national level. The individual poverty rate is elevated at 18.9% versus 17.2% for the state and 15.5% for the nation.

Taxable valuation has shown slight growth since 2006. The most recent tax base reassessment, effective for fiscal 2013 and based on a five-year cycle, resulted in a moderate 4.1% decline. The reassessment and decline in AV did not impact the city's revenue budget, as the city approved an offsetting increase to the mill rate. The fiscal 2016 budget includes a 2.3% increase in the AV based on recent data by the counties. Median home value in High Point is up 1.3% on the year based on January 2016 data and up 6.7% since January 2014 reported by Zillow Group.

MODERATE DEBT POSITION

The city's overall debt burden is moderate at $1,991 per capita and 2.3% of full market value. City-issued debt is relatively low with the majority of the overall debt burden consisting of the overlapping debt of Guilford County. The city funds a significant portion of its capital plan on a pay-as-you-go basis, which keeps debt levels manageable. In addition, amortization of principal is above average with over 70% scheduled for retirement within 10 years.

The city's other long-term liabilities appear very limited. Most of the city's employees participate in the Local Governmental Employees' Retirement System (LGERS), a cost-sharing multi-employer plan administered by the state. The city also participates in a much smaller single-employer pension plan for law enforcement officers. Between both plans, the town's total fiscal 2015 pension contribution was an affordable $5.5 million or 5.2% of governmental spending and 98% of what actuaries required. The LGERS plan is 100% funded and the remaining liability from the law officer's plan is less than 0.1% of market value.

The city funds its other post-employment benefits (OPEB) on a pay-as-you-go basis. The unfunded accrued actuarial liability is low at less than 1% of market value. Total carrying costs for debt service, pension and OPEB were affordable at 15% of governmental spending in fiscal 2015.