Fitch Rates Beverly Hills, California's $75.1MM 2009 Lease Revs 'AA+'; Outlook Stable

The lease revenue bonds are expected to sell via negotiation during the week of Nov. 9, 2009. Bond proceeds will fund the acquisition, construction, and installation of four city-owned and operated water tanks, as well as fully refunding outstanding lease revenue bonds, 1999 refunding series A and 2001 refunding series A.

The 'AAA' implied GO rating reflects the city's strong and mature economic base, a tax structure that captures much of the city's economic activity but also presents vulnerability to economic cycles, sound financial position as characterized by high financial reserves, affordable debt burden, and effective financial management. The city has a solid business base, with particularly prominent retail and hotel businesses, and is a net job importer. However, two of the city's main revenue sources, sales and transient occupancy taxes, currently are demonstrating their sensitivity to economic downturns, and the city has significant constraints on new development. The city is addressing current revenue declines through permanent expenditure reductions and new revenue sources, to date without needing to draw down on its reserves or implementing employee layoffs, furloughs, or compensation reductions.

The 'AA+' lease rating reflects the factors above as well as all lease transactions' strong legal structure. Lease features include the city's covenant to budget and appropriate sufficiently for lease rental payments, and a requirement for rental interruption insurance.

Beverly Hills is a mature, stable, and wealthy community covering a small 5.7 square miles. It is almost entirely developed, with limited potential for redevelopment. The major taxpayers are office, retail, and high-end hotel owners. While the resident population is approximately 35,000, workers and visitors raise the daytime population to an estimated 100,000. The city's unemployment rate has risen sharply to 8.9% in September 2009 but remains considerably lower than the county, state, and nation. Income levels are very high with a median household income of $88,014 in 2007, compared to Los Angeles County's median of $55,192. Taxable value is also very high, at approximately $591,711 per capita.

City finances benefit from a diverse revenue stream with four, roughly co-equal, sources of operating support: sales tax, transient occupancy tax, property tax, and business tax. While sales and transient occupancy taxes are particularly sensitive to economic downturns, the economic impact on property and business taxes is less immediate, giving the city's experienced financial management team time to respond appropriately. The city maintains sizable financial reserves, with a total general fund balance of $93.3 million in fiscal 2008, a substantial 59% of total general fund expenditures, transfers, and other uses. The unreserved general fund balance of $74.6 million represented a very healthy 47% of spending. The city's unaudited fiscal 2009 results remain strong, as a result of timely expenditure reductions in response to the city's revenue pressures. The total general fund balance in fiscal 2009 is expected to be $92.6 million (56% of spending) and the unreserved general fund balance is expected to be $39.2 million (24% of spending). The city is confident that further expenditure reductions, coupled with intensified revenue collection and expanded revenue sources, will ensure balanced operations in fiscal 2010.

As a result of its disproportionately large commercial sector and its residents' high service expectations, Beverly Hills' debt burden is high as a per capita dollar amount but affordable relative to taxable value. Including overlapping debt, the ratios are $15,579 per capita and 2.6% of market value.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch Ratings, San Francisco
Alan Gibson, 415-732-1752
Robert Sakai, 415-732-5628
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com