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New Issue:

MOODY'S ASSIGNS Aa2 RATING TO TOWN OF CLINTON'S (CT) $9.97MM GENERAL OBLIGATION BONDS, SERIES A & B

01 Feb 2011

Aa2 RATING AFFECTS $18.3 MILLION IN PARITY DEBT, INCLUDING THIS ISSUE

Municipality
CT

Moody's Rating

ISSUE

RATING

General Obligation Bonds, Series A

Aa2

  Sale Amount

$5,020,000

  Expected Sale Date

02/03/11

  Rating Description

General Obligation

 

General Obligation Refunding Bonds, Series B

Aa2

  Sale Amount

$4,950,000

  Expected Sale Date

02/03/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Feb 1, 2011 -- Moody's Investors Service has assigned a Aa2 rating to the Town of Clinton's (CT) $5.02 million General Obligation Bonds, Series A and $4.9 million General Obligation Refunding Bonds, Series B. At this time, Moody's has also affirmed the Aa2 rating on the town's outstanding long-term parity debt. The bonds are secured by the town's general obligation, unlimited tax pledge. The Series A bonds will finance various municipal capital improvements. The Series B Bonds will refund a portion of Clinton's 2004 general obligation bonds for a net present value savings in excess of 4% of refunded principal, with no extension of final maturity.

RATINGS RATIONALE

Assignment of the Aa2 rating reflects the town's well managed financial operations and healthy reserve position. The rating also factors the town's stable tax base, favorable wealth characteristics, and a modest debt position.

STRENGTHS

-Conservative financial management practices which have resulted in a history of satisfactory reserve levels

-Underlying economy is stable benefiting from above-average wealth levels

CHALLENGES

-Budget approval in an environment of lower assessed valuations

WELL MANAGED FINANCIAL POSITION REMAINS STABLE

Clinton's financial position is expected to remain sound over the near term given the town's track record of proactive expenditure controls and prudent use of reserves. Over the past six fiscal years the town's Unreserved Undesignated General Fund balance position has remained in excess of 11% of revenues, comfortably above the town's formal policy which calls for a minimum undesignated reserve balance of 7% of operations. The town ended fiscal 2009 with a $935,548 General Fund deficit, including a $2.08 million transfer out to the Capital Projects Fund for pay-as-you-go capital expenditures. Net of the transfer out, the town ended structurally balanced with a $1.1 million operating surplus. Draft fiscal 2010 results indicate positive operating results. Supported by conservative revenue and expenditure estimates the town produced a $1.2 million addition to reserves, including a $1.1 million transfer out for capital.

The fiscal 2011 budget represents a modest 2.4% increase over the prior year. The town budget, which failed its first referendum vote in recent history, is a $1.4 million increase over the 2010 budget and is balanced primarily with additional property tax revenues (2.7% or $944,000 over the prior year). Expenditure growth is driven by a $973,000 (3.3%) increase in education expenses and the budget includes the town's typical $250,000 fund balance appropriation as well as a $894,000 appropriation for pay-as-you-go capital, providing additional financial flexibility. Also of note, the town's two pension plans remain adequately funded and the town consistently budgets for the full annual required contributions (ARC) for both plans.

TAX BASE REMAINS STABLE; GRAND LIST PROJECTED TO DECLINE IN FISCAL 2012

Clinton's grand list is expected to decline following its next revaluation (effective fiscal 2012), consistent with regional trends. Located on the central coast of Connecticut (G.O. rated Aa2/stable outlook), approximately 17 miles east of New Haven (G.O. rated A1) growth of the town's $2.29 billion equalized net grand list (ENGL) has slowed to a 1.7% annual average rate over the last five years from 6.3% for the prior five year period, reflecting slower building activity due to depressed economic conditions. The town is currently in the process of conducting its five-year town-wide property revaluation and anticipates values declining between 5% and 10%%. The value declines are not expected to have a material impact the town's revenue raising ability as there are no levy or tax rate limits for Connecticut municipalities. Notably, the local economy contains a seasonal element with summer population influx increasing the town's population by approximately 20%. Providing year-round stability is a moderate commercial presence, of which the flagship is the 247,000 square foot Clinton Crossing Outlet Center consisting of 65 retail outlets and shops. Clinton Crossing is also the town's largest taxpayer, though concentration is limited, as it represents just 2.6% of the total grand list. Overall tax base concentration has moderated over the last several years with the town's top ten taxpayers representing an average 7.8% of ENGL in 2011.

The town demonstrates average wealth levels although median family income had improved from 104.7% of the state median in 1990 to 109% as of the 2000 census. The solid $169,371 (190% of the nation, 113% of the state) ENGL per capita is somewhat reflective of the town's seasonal and second home component.

LOW DEBT BURDEN

Moody's believes Clinton's modest debt position will remain manageable given the town's favorable amortization of principal, limited near term borrowing plans, and ongoing pay-go financing to support capital projects. Including this issue, the town's overall debt position is moderate at 0.8 % of ENGL, below the 2.6% state and national median. Additionally, principal amortization remains favorable with 69% retired in 10 years. Over the near term the town expects to pursue a referendum for town hall and police station renovations as well as road repairs. Further, over the longer-term, the town anticipates moving forward with a larger project for the establishment of a wastewater treatment system sometime over the next five to ten years. The project would likely be funded through a combination of homeowner assessments and Clean Water Fund loan proceeds. All of the town's debt is fixed rate and the town is not party to any derivative agreements.

What could make the rating change - UP

-- Continued improvement to the town's financial position

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

What could 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:

2000 Census Population: 13,094

2008 Estimated Population: 13,554

2010 Equalized net grand list: $2.29 Billion

2010 Equalized net grand list per capita: $169,371

1999 Per Capita Income: $26,080 (90.7% of the state, 120.8% of the U.S.)

1999 Median Family Income: $71,403 (109.0% of the state, 142.7% of the U.S.)

2009 General Fund Balance: $5.7 million (13.3% of General Fund revenues)

2009 Unreserved General Fund Balance: $5.4 million (12.5% of General Fund revenues)

Direct Debt Ratio: 0.8% of Equalized Net Grand List

Payout of Principal in 10 Years: 69%

Post-Sale Parity Debt Outstanding: $18.3 million

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

Conor McEachern
Analyst
Public Finance Group
Moody's Investors Service

Andy Moleon
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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MOODY'S ASSIGNS Aa2 RATING TO TOWN OF CLINTON'S (CT) $9.97MM GENERAL OBLIGATION BONDS, SERIES A & B
No Related Data.
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