OREANDA-NEWS. Fitch Ratings has affirmed the following Renton, Washington (the city) ratings:

--\$13.9 million limited tax general obligation (LTGO) bonds, series 2006 at 'AA';
--Implied unlimited tax general obligations at 'AA+'.

The Rating Outlook is Stable.

SECURITY
The LTGO bonds are payable from an irrevocable full faith, credit, and resources pledge to levy ad valorem tax sufficient to pay debt service. This tax pledge is constrained by property tax levy growth of 1% per year plus new construction. The tax rate is statutorily limited.

KEY RATING DRIVERS

CONCENTRATED BUT SOUND ECONOMIC BASE: The Boeing Company (Boeing) is a notable regional economic force that contributes to favorable socio-economic metrics. Ongoing development has diversified the city's economic profile.

SOUND FINANCIAL PERFORMANCE: Strong financial management, expenditure controls, and cooperative management-labor relations support balanced operations and ultimately solid reserve levels. The diverse revenue base has proven resilient, compensating for limits on allowable tax levy growth.

MANAGEABLE DEBT BURDEN: The city's debt burden is expected to remain moderate given the lack of new debt issuance plans and above-average amortization. Carrying costs remain very affordable.

IMPLIED ULTGO AND LTGO RATING DISTINCTION: Fitch assigned the LTGOs a rating one notch lower than the implied ULTGOs because of the limited permitted increase to the tax levy securing the LTGOs.

RATING SENSITIVITIES

FUNDAMENTAL CREDIT CHARACTERISTICS: The rating is sensitive to shifts in fundamental credit characteristics including the city's solid financial profile. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE
Renton lies just to the south of Seattle (ULTGO bonds rated 'AAA', Stable Outlook by Fitch). The city's population of approximately 97,000 nearly doubled over the past decade due to large annexations. The city does not anticipate similarly sized annexations in the future.

CONCENTRATED BUT SOUND ECONOMIC BASE
City residents benefit from the employment opportunities offered by the large and diverse Seattle-Tacoma-Bellevue metropolitan area's economy. Boeing (Fitch-rated IDR of 'A', Stable Outlook) plays a significant role in the economies of both the city and the region. Boeing, by far the city's largest employer (16,400 employees in the first quarter of 2014), is expanding its production of Boeing 737 airplanes in the city in order to reduce its substantial backlog of orders. It is currently constructing a third production line and significantly reconfiguring its Renton plant to make this possible.

The continued attractiveness of the city, as evidenced by successful on-going development, population and economic growth, and the rebounding tax base, points to sound economic fundamentals. In the near term, strong residential, hotel, and commercial development will allow the city's assessed valuation to recover fully from the 20% loss of value during the housing-led recession.

City unemployment rates have historically trended below those of the nation, as evidenced by the low 4.1% rate in November 2014. By contrast, the state's unemployment rate was 6.1% and the nation's was 5.5%. Over the past year, the city's employment growth of 6.4% has been substantially above the national level. Income indicators exceed those of the state and nation but are somewhat below those of the wealthy region.

SOUND FINANCIAL PERFORMANCE
Reserves levels are consistently sound. The city concluded 2013 with a general fund surplus of \$1.8 million, equal to 2% of spending. The unrestricted fund balance was a solid \$20.2 million, or 21.14% of spending. Current projections indicate basically breakeven results in both 2014 and 2015. A catastrophic reserve and a rainy day reserve augment the general fund reserves by \$12 million. Further cushioning the city is its ability to internally borrow up to \$39 million from its internal services and capital projects funds.

Strong financial management, conservative revenue projections, and expenditure controls (facilitated by cooperative relations with labor) have boosted the city's positive financial performance. The city's financial operations benefit from a diversity of revenue sources, led by property taxes (33% of 2013 general fund revenues), sales taxes (26%), and utility taxes (14%).

Under state law there are significant limitations on property tax increases. However, the city retains a number of options to raise its revenues if necessary. It has just established a business and occupancy tax which is designed to raise general fund revenues from 2016 onwards to help address projected operating expenditure increases. City residents can be asked to approve levy lid lifts. Implementation of a vehicle fee would be a way of raising revenues for transportation uses. The city is currently investigating the establishment of a separate regional fire authority so that the fire service can access fee-for-service monies. Creation of a special parks taxing district would allow the city to access another tax levy income stream.

The city's continued use of a conservative biennial budgeting process and long-range projections provide early warning signs of any structural imbalances than need to be addressed. The 2015-2016 biennium budget contains no new programs, only nine new positions (six in the general fund), limited service restorations, and funding for some deferred maintenance and capital projects.

MANAGEABLE DEBT BURDEN
Overall debt is moderate at \$3,475 per capita and 3% of market value. Amortization is above-average at 67% of principal repaid in 10 years. The city plans to avoid issuing new money bonds in favor of pay-as-you-go and grant funding so that the city can benefit from lower annual debt service payments in the future. By 2023, \$4 million annually will be freed up from debt service repayments for other uses if the city does not issue further debt.

Most city employees participate in one of the state's cost-sharing multiple-employer pension plans. The city operates a closed single-employer firefighter's pension plan, which is overfunded. Other post-employment benefits (OPEB) are available for law enforcement officers and firefighters. The firefighters' OPEB system is overfunded, and the city aims to pay down the high unfunded OPEB liability for law enforcement officers over the next 30 years.

In 2013, the city's total debt service, annually required pension contribution, and OPEB pay-as-you-go costs equaled a very affordable 10.2% of total governmental spending.