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MOODY'S ASSIGNS AN A1 RATING TO VILLAGE OF SISTER BAY'S (WI) $5.4 MILLION GO REFUNDING BONDS, SERIES 2011A AND $6.5 MILLION GO REFUNDING BONDS, SERIES 2011B

07 Apr 2011

A1 APPLIES TO $16.5 MILLION OF POST-SALE GOULT DEBT

Municipality
WI

Moody's Rating

ISSUE

RATING

General Obligation Refunding Bonds, Series 2011A

A1

  Sale Amount

$5,350,000

  Expected Sale Date

04/12/11

  Rating Description

General Obligation

 

General Obligation Refunding Bonds, Series 2011B

A1

  Sale Amount

$6,500,000

  Expected Sale Date

05/10/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Apr 7, 2011 -- Moody's Investors Service has assigned an A1 rating to the Village of Sister Bay's (WI) $5.4 million General Obligation Refunding Bonds, Series 2011A and $6.5 million General Obligation Refunding Bonds, Series 2011B. Concurrently, Moody's has affirmed the A1 rating on the village's $16.6 million in outstanding general obligation debt, including the current offering.

SUMMARY RATINGS RATIONALE

While the bonds are secured by the village's general obligation unlimited tax pledge, village officials expect to use hotel/motel tax receipts and marina revenues to abate debt service. Proceeds of the Series 2011A bonds will be used to retire the village's Note Anticipation Notes dated June 3, 2010 and maturing June 1, 2011. Proceeds of the Series 2011B bonds will be used to retire the village's Note Anticipation Notes dated November 1, 2007 and maturing June 13, 2011. Both of the Note Anticipation Notes were originally issued for land acquisition, demolition of existing structures, and renovations related to the village's waterfront area. Assignment and affirmation of the A1 rating reflects the village's favorably located and small tax base, satisfactory financial performance, and manageable though above average debt levels.

STRENGTHS

* Relatively stable financial operations with limited expenditure obligations

* Strong full value per capita and median home values due to small year-round population and lakefront homes

CHALLENGES

* Small tax base dependent on seasonal tourism

* Modest nominal basis unreserved General Fund balance, though strong on a percentage basis (24% at the end of 2009)

DETAILED CREDIT DISCUSSION

SMALL TAX BASE WITH TOURISM-BASED LOCAL ECONOMY

We expect moderate growth for the village's $419 million tax base due to ample land available for development and the village's favorable waterfront location. The village is located northeast of Green Bay (GO rated Aa1) on the Door Peninsula in Door County (Aa2), a popular summer tourist destination. After healthy growth earlier in the last decade with an average annual growth rate around 6% annually, the village has seen a recent slowing of growth, with a modest 1.3% valuation decline in 2010. The village's area is only 30% built-out, leaving ample room for future growth. Current development is focused around the waterfront and downtown, with plans to increase the number of boat slips available in summer 2011 due to the 2010 purchase of additional waterfront property for the village. The waterfront redevelopment has spurred additional development projects, including a planned expansion at the grocery store and two new condominium buildings. Village income indices slightly exceed national averages, with per capita income and median family income at 116% and 102%, respectively in the 2000 census. As evidence of the strong tourism and vacation home economy, the median home value in the county is 170% of the median value for the state. During the summer months, the village's population can increase up to 4,000 individuals, although the year-round population from the 2010 census is 983 residents, resulting in an extremely high full value per capita of $426,593. The county's unemployment rate exceeded the state in December 2010 at 10.8%, compared to 7.0% for the state and 9.1% for the nation, reflecting the seasonal nature of the local economy. The county typically sees high unemployment rates in the winter and lower rates over the summer.

SATISFACTORY FINANCIAL OPERATIONS WITH MODEST NOMINAL BASIS FUND BALANCES

The village's financial operations are expected to remain satisfactory given its relatively stable operating revenues and limited expenditure obligations. The village has only twelve year-round employees, with most operations (including fire and police protection, public works and library) provided via contract with the county or with joint ventures. The village had a moderate $70,000 operating deficit in 2009 due to declining revenue streams, leaving its unreserved fund balance at $321,000, or 24% of General Fund revenues. The total fund balance is higher at $801,000, though the additional funds primarily reflect monies invested in the joint venture fire department, which are not available for the village to spend. To balance the budget in fiscal 2010, the village reduced wage increases and increased the employee share of health insurance. Through these measures, the village ended the year with an estimated $40,000 operating surplus, bringing reserves to an estimated $363,000, or 27% of 2009 revenues. We note that while the village's reserves are strong on a percentage basis, the nominal value of operating reserves is somewhat limited, providing a modest cushion in the case of unexpected budgetary variances.

The fiscal 2011 budget calls for a $50,000 operating surplus, though the expected amount may decline due to potential reductions in state aid. The state is currently finalizing its fiscal 2012 budget, which starts July 1, 2011 and may lead to reductions in local government revenues from the state. As state aid is not a significant percentage of the village's revenues, management does not expect a large budgetary impact from these expected declines. Property taxes are the village's largest revenue stream at 70% of 2009 revenues, followed by transfers from marina operations at 11%, and intergovernmental funds at 7.5%. The village recently imposed fee increases at its marina and expects to yield additional revenues due to increased boat slips during the summer 2011 seasons. These changes will allow the marina to support debt service on the current offering and continue to transfer funds to the General Fund.

ABOVE AVERAGE BUT MANAGEABLE DEBT BURDEN; LIMITED FUTURE BORROWING PLANNED

We expect the village's above average debt burden will remain manageable given rapid amortization of its general obligation debt and limited additional borrowing plans. The village's overall debt is above average at 4.3% of full value, with its direct debt burden at 3.9%. Post-sale, the village will be able to access only $4.9 million in new borrowing under statutory debt limits, representing 23.5% of unused debt margin. Favorably, the village has developed a comprehensive master plan for its utilities and expects to make payments on upcoming capital projects in the plan using cash on hand in the utility funds. Additionally, the village is seeking grant opportunities to cover downtown reconstruction and streetscape plans, though may issue some debt for the project in 2012. Payout of general obligation debt is below average, with 42.7% retired in ten years, though matches the useful life of the assets that were financed. All of the village's outstanding debt is fixed rate, and the village is not a party to any interest rate swap agreements.

What could change the rating - UP

-Strengthening of liquidity and General Fund balances

- Growth in tax base and demographic profile

What could the change the rating - DOWN

- Material multi-year declines in fund balances and liquidity

- Deterioration of the village's tax base and demographic profile

KEY STATISTICS

2000 Population: 886 (31.3% increase since 1990)

2010 Population: 983 (10.9% increase since 2000)

2010 Full market valuation: $419 million (2.3% average annual increase since 2005)

Estimated full value per capita: $426,593

Per capita income as % of U.S. (1999): 115.9%

Median family income as % of U.S. (1999): 101.7%

Door County unemployment rate (December 2010): 10.8%

FY2009 unreserved General Fund balance: $321,000 (24% of General Fund revenues)

Debt burden: 4.3% (3.9% direct)

Principal amortization (10 years): 42.7%

Post-sale general obligation debt outstanding: $16.5 million

PRINCIPAL METHODOLOGY USED

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, and public information.

Moody's Investors Service considers the quality of information available on the credit satisfactory for the purposes of assigning a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Emily Robare
Analyst
Public Finance Group
Moody's Investors Service

Elizabeth Foos
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

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MOODY'S ASSIGNS AN A1 RATING TO VILLAGE OF SISTER BAY'S (WI) $5.4 MILLION GO REFUNDING BONDS, SERIES 2011A AND $6.5 MILLION GO REFUNDING BONDS, SERIES 2011B
No Related Data.
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