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Fitch Affirms City of Pamplona at 'BBB'; Outlook Stable
April 4, 2014 / 3:36 PM / 4 years ago

Fitch Affirms City of Pamplona at 'BBB'; Outlook Stable

(The following statement was released by the rating agency) LONDON/MADRID/PARIS, April 04 (Fitch) Fitch Ratings has affirmed the City of Pamplona's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'BBB' with Stable Outlook. Fitch has also affirmed the Short-term foreign currency IDR at 'F2'. The ratings reflect Pamplona's steady operating revenue and current transfers that the city receives from the Autonomous Community of Navarre under a special fiscal regime. The Stable Outlook is in line with that on Spain's 'BBB' rating. KEY RATING DRIVERS Under Fitch's base case scenario, Pamplona's budgetary performance is likely to remain stable in the 2014-2016 period with an operating balance of 9.5% of operating revenue. This is because most of the taxes collected are fairly resilient to the economic cycle and the city receives a high amount of current transfers from Navarre, which represents 45% of total operating revenue in the 2014 budget. The administration has maintained a low property tax rate, equivalent to EUR131.6 per capita in 2012, much lower than many provincial capital cities in Spain. Fitch does not expect this trend of low property tax rates to change over the medium term. Staff costs declined 5% in 2012 following the elimination of the year-end bonuses for all public employees, and in 2013 represented 47% of total operating expenditure. Fitch expects staff costs to grow at a slow pace in the medium term. Pamplona has traditionally reported moderate debt levels, which totaled EUR108.9m in 2013, representing 61.8% of current revenue. Debt repayment in 2013 was less than half the city's current balance, and Fitch does not expect this trend to change in the medium term. For the 2014-2016 period, Fitch expects direct debt to remain in the 60%-65% range of current revenue, given that the city has no new borrowing plans. Its stable cash position and low level of payables mean the city has no need either to contract credit lines or to apply for state funding support available to municipalities in Navarre to cover operating expenditure from previous years. Because the 2013 budget is being rolled over to 2014 it prevents negotiations for new investments, limiting annual capital expenditure to 10% of total expenditure. Fitch also considers that the level of infrastructure of the city is adequate, limiting the risk of a sudden and substantial increase of capital expenditure. Labour market and economic indicators have fared better than the national average in 2013. Navarre's unemployment rate of 17% was below the national rate of 26% and GDP per capita was 27.3% above the Spanish average in 2013. The city, which accounts for 31% of the regional population, is the political capital of the regional government of Navarre. Pamplona is also Navarre's economic centre, with a diversified economy and, in particular, a dynamic healthcare sector with nationwide coverage. RATING SENSITIVITIES A downgrade of the sovereign would be reflected in the ratings of Pamplona. Although presently seen as unlikely, the ratings may be downgraded if the current balance declines significantly to a level much lower than the 60%-65% debt repayment expected for 2014. Contacts: Primary Analyst Guilhem Costes Senior Director +34 93 323 8410 Fitch Ratings Espana, S.A.U. Paseo de Gracia, 85, Barcelona 08008 Secondary Analyst Julia Carner Analyst +34 93 323 8401 Committee Chairperson Christophe Parisot Managing Director +33 1 44 29 91 34 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable criteria, "Tax-Supported Rating Criteria", dated 14 August 2012, "International Local and Regional Governments Rating Criteria outside the United States", dated 9 April 2013 are available at Applicable Criteria and Related Research: Tax-Supported Rating Criteria here International Local and Regional Governments Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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