One of the best-known rating companies has upgraded Riverside County’s outlook to stable, a change that will save $2 million to $3 million on a $325 million bond issuance for a new jail in Indio and other smaller capital projects. The county’s outlook previously was set as “negative.”
The other capital projects funded through the 30-year bond include a parking structure, courtrooms at the Larson Justice Center in Indio and at the Southwest Justice Center in French Valley, and a laundry expansion at the Larry D. Smith Correctional Facility in Banning. The bond issue will be put out for sale on May 19.
In taking its action, Fitch noted that county financial operations are structurally balanced, reserve levels are satisfactory and that the company expects revenues to benefit from economic tailwinds. Riverside University Medical Center’s rapid operational improvements over the past year following years of fiscal distress. But the upgrade also came with a warning: “However, policymakers will need to exercise spending restraint given narrowly balanced operations, limited revenue raising capabilities per state limitations, and significant expenditure pressures.”
Fitch noted the county’s diverse economy and its potential for growth, given the proximity to large Southern California employment markets, its competitive home prices and the availability of developable land. It also described the county’s sound debt profile, noting that the obligation on most post-employment benefits is minimal and that county pension plans are adequately funded.
However, debt levels are moderate to high due largely to county debts that have overlapping repayment schedules but different funding sources. Fitch pointed out that any material weakening in the county’s financial position could reduce its ratings again. The company noted, however, that changing the county’s outlook from negative to stable reflects Fitch’s expectations that such an event is unlikely.