San Jose Fin Auth, CA Lease Rev Bnds Rtd 'Ap by S&P

Business Wire, July 11, 1997

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/11/97--Standard & Poor's today has assigned its single-`Ap' rating to San Jose Finance Authority, Calif.'s $9 million lease revenue bonds (Fire Apparatus, Childcare Facilities, and Library Land Financing Project) series 1997B dated July 1, 1997, issued for the city of San Jose. The bonds are scheduled to sell the week of July 14, 1997.

The rating on the series 1997B lease revenue bonds reflects:

-- A lease legal structure that includes the city of San Jose's covenant to budget and appropriate lease payments;

-- The somewhat weaker but adequate essentiality of the leased assets -- fire equipment, land, and three school buildings; and

-- The city's strong general creditworthiness.

Proceeds will finance the acquisition of 11 fire engines and an aerial truck, refinance a land lease for a city library site, and acquire and install modular buildings for three school districts' child care services. The rating is provisional pending acquisition of the fire equipment scheduled for February 1999.

The city's general creditworthiness reflects:

-- A growing economic base dominated by the high-technology sector located throughout the Silicon Valley area,

-- Above-average wealth and income indicators,

-- A moderate debt burden, and

-- Strong financial performance.

The city has been benefiting from development and growth associated with the strong Silicon Valley economy. Population has increased 8.6% since 1990 to 849,363. San Jose's large residential component continues to benefit from strong property values in the area and the city is beginning to show success in attracting high-technology corporation headquarters to the downtown area. Overall property values in the city grew 4.3% in 1997 to $49.4 billion, or a strong $58,210 per capita. Per capita wealth levels remain strong at about 118% of the U.S., but below county levels.

The city's debt burden remains moderate and manageable at $1,063 per capita and 1.8% of true value. Financially, San Jose has been benefiting from the strong performance of the local economy. The city ended fiscal 1996 with an unreserved general fund balance of $45.6 million, or 12.5% of expenditures.

For fiscal 1997, preliminary indications are that San Jose will end the year with a surplus balance as much as $5 million higher than the prior year. The city's 1998 budget is balanced and revenue growth estimates appear reasonable.

Based on past experience, the city expects its budget will allow it to maintain existing fund balance levels.

Under the lease structure, the city will acquire 11 fire trucks and an aerial truck and will refinance a land lease for a public library site. In addition, as part of a countywide effort to provide child care facilities at school sites, the city is financing portable buildings for three school districts located in the city. The districts are leasing three school buildings to the city to use as security for this transaction. While the city will lease those facilities back to the districts, the city remains responsible for debt service payments. The fire trucks are being amortized over a period of eight years, while the other facilities will be amortized over the 15-year duration of the issue.

OUTLOOK: Stable.

The outlook reflects the city's solid financial performance and the strength of the area economic base, Standard & Poor's said. -- CreditWire

Copyright 1997, Standard & Poor's Rating Services

CONTACT: Daniel Stone, San Francisco (1) 415-765-5016

Jeffrey Thiemann, San Francisco (1) 415-765-5006