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MOODY'S ASSIGNS Aa2 RATING TO THE TOWN OF WESTBROOK'S $10.2 MILLION GENERAL OBLIGATION REFUNDING BONDS

22 Sep 2010

Aa2 RATING APPLIES TO $26.3 MILLION IN PARITY DEBT, INCLUDING CURRENT ISSUE

Municipality
CT

Moody's Rating

ISSUE

RATING

General Obligation Refunding Bonds, Issue of 2010

Aa2

  Sale Amount

$10,220,000

  Expected Sale Date

10/12/10

  Rating Description

General Obligation

 

Opinion

NEW YORK, Sep 22, 2010 -- Moody's Investors Service has assigned an Aa2 rating to the Town of Westbrook's $10.2 million General Obligation Refunding Bonds, Issue of 2010. Concurrently, we have affirmed the Aa2 rating on the town's $26.3 million in post-refunding general obligation unlimited tax debt. The refunding is expected to generate a net present value savings in excess of 5% of refunded principal, without extending the maturity of the debt.

RATINGS RATIONALE

The Aa2 rating reflects the town's moderately-sized tax base with above average wealth levels, improved financial position, and moderating debt profile.

IMPROVED FINANCIAL POSITION EXPECTED TO REMAIN STABLE

Westbrook has stabilized and improved its financial position over the last four fiscal years increasing its reserve position to levels more consistent with the Connecticut median for similarly rated municipalities. Through a combination of consistent tax rate increases and closely monitored expenditures the town's undesignated General Fund balance has increased by over 67% since 2005 to a solid $3.02 million (12.7% of revenues) at the end of fiscal 2009. At this level, the town remains above its informal goal of maintaining undesignated reserves of at least 10% of expenditures and in line with the 11% median for Aa2 rated Connecticut municipalities. Fiscal 2009 operations ended with a $432,000 increase to General Fund balance due to over $688,000 in expenditure savings, fully replenishing its budgeted $250,000 fund balance appropriation. Following the recent close of fiscal 2010 preliminary projections indicate balanced operations, with fund balance levels remaining in line with the prior fiscal year. Of note, fiscal 2010 operations included a $503,000 transfer out for pay-as-you capital improvements.

The fiscal 2011 budget, which was adopted at its first referendum vote, represents a 3.9% increase over the prior year. The budget is balanced with a 5.9% increase in property taxes and without a General Fund balance appropriation. The budget accommodates a 6.3% ($173,000) increase in general government expenditures and a 4.3% ($588,000) increase in education costs.

Additionally, officials are committed to funding 100% of the ARC for its pension obligations. The Town Employees Plan and Volunteer Firefighter Plan were funded at 95% for the town plan (as of 2009) and 48% for the firefighters plan (as of 2009).

MODERATELY SIZED EQUALIZED NET GRAND LIST WITH SEASONAL HOME COMPONENT

Moody's believes that Westbrook's moderately sized $1.8 billion equalized net grand list (ENGL) will remain healthy given its stable residential tax base and ongoing economic activity within its commercial sector. Located approximately 35 miles east of New Haven (G.O. rated A1) and 21 miles west of New London, the town's grand list has expanded by a healthy 11% (inclusive of the 2006 revaluation which boosted values a sizable 62%) annual average rate over the last five years. While grand list growth has moderated in subsequent non-revaluation years the town expects modest ongoing expansion from a number of recently completed and ongoing development projects including a 169,000 square foot expansion at the Lee Company, the town's largest taxpayer (4.1% of the grand list), a new car dealership (under construction), a planned expansion at the Waters Edge Resort, the third largest taxpayer. (1.4% of the grand list), and several residential subdivisions. Given Westbrook's location on the Long Island Sound, the town has a significant number of seasonal residences, which drives the ENGL per capita to a strong $277,586 (186% of the statewide median). The median family and per capita incomes exceed the national Aa2 medians at $71,344 (143% of the nation) and $28,680 (133% of the nation), respectively.

DEBT POSITION EXPECTED TO BECOME INCREASINGLY MANAGEABLE

The town's historically leveraged debt position is expected to continue to moderate due to a lack of significant near-term borrowing plans coupled with the continuation of pay-as-you-go capital financing. Debt service as a percent of expenditures reached an extraordinary high of 23% in fiscal 1995 and has since declined ending fiscal 2009 at 14.3%. Debt service levels are expected to continue to drop with current projections indicating debt service as a percent of expenditure declining below 10% by 2014. The Aa2 median debt service as a percent of expenditures is 8.2%. The town's net direct debt burden remains slightly above average at 1.4% of ENGL however amortization of principal remains in line with the nation median, with 70% of principal is retired within 10 years. Looking ahead, while the town maintains a long-range fiscal plan, it does not anticipate any significant near-term increase to its debt position. All of the town's existing debt is fixed rate and the town is not party to any derivative agreements.

KEY STATISTICS:

2008 Census Population (estimated): 6,641(+5.5% since 2000)

2011 Equalized Net Grand List: $1.8 billion

Equalized Value Per Capita: $277,586

Per Capita Income: $28,680 (100% of state, 133% of U.S.)

Median Family Income: $71,344 (109% of state, 143% of U.S.)

2009 Total General Fund Balance: $3.0 million (12.7% of revenues)

Overlapping Debt Burden: 1.8%

Adjusted Debt Burden: 1.2%

Payout of Principal in 10 Years: 70%

Post-closing Parity General Obligation Debt Outstanding: $26.3 million

The principal methodology used in rating Town of Westbrook, CT, 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, and confidential and proprietary Moody's Investors Service's 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

Susan Kendall
Backup Analyst
Public Finance Group
Moody's Investors Service

Geordie Thompson
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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New York, NY 10007
USA

MOODY'S ASSIGNS Aa2 RATING TO THE TOWN OF WESTBROOK'S $10.2 MILLION GENERAL OBLIGATION REFUNDING BONDS
No Related Data.
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