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New Issue:

MOODY'S ASSIGNS Aa2 RATING TO THE TOWN OF GARNER'S (NC) $6.05MM G.O. BONDS

30 Sep 2010

Aa2 RATING APPLIES TO $6.4 OF PARITY DEBT OUTSTANDING, INCLUDING CURRENT ISSUE

Municipality
NC

Moody's Rating

ISSUE

RATING

General Obligation Public Improvement Bonds, Series 2010

Aa2

  Sale Amount

$6,050,000

  Expected Sale Date

10/05/10

  Rating Description

General Obligation

 

Opinion

NEW YORK, Sep 30, 2010 -- Moody's Investors Service has assigned a Aa2 rating on Town of Garner's (NC) $6.05 million General Obligation Public Improvement Bonds, Series 2010. Concurrently, we have affirmed the Aa2 rating on the town's outstanding parity debt which is secured by a general obligation, unlimited tax pledge. Bond proceeds will finance street improvements as well as recreation and park related capital projects.

RATINGS RATIONALE

The Aa2 rating incorporates the town's consistently strong financial position, steady tax base growth, and low debt burden.

CONSISTENTLY STRONG FINANCIAL POSITION SUPPORTED BY SOLID RESERVES

The town's financial position is expected to remain strong supported by conservative budgeting practices and proactive fiscal management. The town has maintained consistently strong General Fund balance levels averaging over 50% during the last five fiscal years (ending June 30, 2009). At fiscal year-end 2009 the town held $12.5 million in General Fund balance, or a strong 52.4% of General Fund revenues, representing a 48% increase since fiscal 2004. Fiscal 2009 ended with a $950,000 addition to fund balance as the town was able to fully replenish its $2.9 million budgeted fund balance appropriation and add to reserves through over $3.7 million in expenditure savings. While the town is in the process of developing a formal fund balance policy, management currently targets the maintenance of undesignated General Fund balance at no less than 25% of General Fund revenues. The town remained well in excess of this target at the end of fiscal 2009 with an undesignated reserve balance equal to 40.6% of revenues.

Unaudited fiscal 2010 results indicate further fund balance growth with a projected $865,700 addition to reserves. Positive year-end results were supported by conservative property tax revenue estimates ($510,000 positive variance) and lower than budgeted expenditures across town operations. Fund balance is expected to increase to a solid 54% of revenues. The fiscal 2011 budget represents a 3.8% reduction from the prior year's budget. The budget is balanced without a tax rate increase or the use of reserves as a revenue source. The town took a number of austerity measures to balance including limiting employee merit increases to 50% of the previous year's amount, implementing a hiring freeze and obtaining cost avoidance by limiting pay-as-you-go capital improvement projects.

STEADY TAX BASE GROWTH SPURRED BY PROXIMITY TO RESEARCH TRIANGLE PARK AND STATE CAPITOL

Located in southern Wake County (G.O. rated Aaa/stable outlook), Garner's estimated $3 billion tax base is expected to continue to benefit from its proximity to the state capitol, Raleigh (G.O. rated Aaa) and employment opportunities at the Research Triangle Park. Assessed valuation increased at an average annual rate of 10.5% from 2005 to 2010, reflecting new construction and the value appreciation following a county-wide property revaluation in fiscal 2009, which resulted in a 29% increase in values. The town' tax base is characterized by a mix of residential (60%) as well as commercial properties (40%) and exhibits a slightly above average degree of taxpayer concentration with the top ten taxpayers representing 13.7% of assessed value. Notably, the town's third largest taxpayer, ConAgra Foods (441 employees; 75 of which are Garner residents), has announced it will discontinue operations in the town in August 2011. The company intends to gift the town 111 acres of land, equipment, and donate $3 million. The town plans to create a redevelopment commission to plan and manage the marketing and development of the property. Positively, Butterball, LLC and Golden State Foods have moved operations to the town and added several new jobs to the community. Income levels are above both state and national medians with a healthy $116,131 full value per capita.

LOW DEBT BURDEN EXPECTED TO REMAIN MANAGEABLE

The town's debt position is expected to remain manageable despite near term borrowing plans given Garner's currently minimal debt burden and continued tax base growth. Following this issue, the town's debt burden will remain a below average at 0.4% of assessed value. Amortization of principal will slow however, with 56% of principal retired within 10 years (including installment purchase bonds). Debt service represented a below average 4.7% of expenditures in 2009. Looking ahead, the town is in the process of developing a multi-year capital plan and expects additional bonding over the next several years for a various capital projects. At the end of fiscal 2010 the town maintained a $5.6 million balance is its Capital Reserve Fund, which is available to mitigate the impact of future borrowings. All of the town's debt is fixed rate and the town is not party to any derivative agreements.

What would make the rating change - UP

-- Maintenance of financial flexibility in line with higher rating categories

-- Strengthening of tax base and demographic profile to levels more consistent with higher rating categories

What would make the rating change - DOWN

-- Protracted structural budget imbalance

-- Depletion of General Fund balance

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

KEY STATISTICS

2009 Population: 26,341 (44% increase since 2000)

2010 Full Valuation: $3.0 billion

Full value per capita: $116,131

1999 Per capita income (as % of NC and US): 22,433 (110.5% and 103.9%)

1999 Median family income (as % of NC and US): 58,302 (125.8% and 116.5%)

Direct debt burden: 0.4%

Overall debt burden: 1.8%

Payout of principal (10 years): 56.5%

FY 2009 General Fund Balance: $12.5 million (52.4% of General Fund revenue)

Post-sale G.O. debt outstanding: $6.4 million

The principal methodology used in rating Garner (Town of) NC was General Obligation Bonds Issued by U.S. Local Governments rating methodology published in October 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' 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

Conor McEachern
Analyst
Public Finance Group
Moody's Investors Service

Robert Weber
Backup Analyst
Public Finance Group
Moody's Investors Service

Julie Beglin
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service
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USA

MOODY'S ASSIGNS Aa2 RATING TO THE TOWN OF GARNER'S (NC) $6.05MM G.O. BONDS
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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