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MOODY'S ASSIGNS Aa3 RATING TO TOWN OF WEST SPRINGFIELD'S (MA) $10.3 MILLION G.O. MUNICIPAL PURPOSE LOAN OF 2011 BONDS

06 Jun 2011

Aa3 RATING APPLIES TO APPROXIMATELY $36 MILLION OUTSTANDING G.O. DEBT

Municipality
MA

Moody's Rating

ISSUE

RATING

General Obligation Municipal Purpose Loan of 2011 Bonds

Aa3

  Sale Amount

$10,310,000

  Expected Sale Date

06/15/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Jun 6, 2011 -- Moody's Investors Service has assigned a Aa3 rating to the Town of West Springfield's $10.3 million G.O. Municipal Purpose Loan of 2011 Bonds. Concurrently, Moody's has affirmed the town's long-term rating of Aa3, affecting approximately $36 million of outstanding general obligation bonds, including the current issue. The bonds are secured by the town's general obligation limited tax pledge as debt service is subject to the levy limits of Proposition 2 ½ and will finance energy improvement and conservation projects and street, sidewalk and water main improvements.

RATING RATIONALE

The Aa3 rating reflects the town's stable financial position characterized by sound reserve levels, a large residential tax base, and a manageable debt burden.

STRENGTHS

-Stable financial position with healthy reserves

-Manageable debt burden

CHALLENGES

-Declines in tax base assessed and equalized valuations

-Wealth and income levels below the state average

STABLE FINANCIAL POSITION WITH SATISFACTORY RESERVES

Moody's believes the town's financial position will remain stable given a conservative approach to budgeting and maintenance of reserves, which are expected to be maintained at sound levels. West Springfield's available reserves, which are comprised of the town's unreserved General Fund balance and its Stabilization Fund, amounted to $12 million at fiscal 2010 year-end (a sound 13.7% of General Fund revenues), up from $11.3 million in fiscal 2009 (12.7% of revenues). The town ended fiscal 2010 with balanced operations indicated by a $2 million dollar surplus of operating revenue versus expenditures however after transferring funds to the Capital Project fund, the year ended with a $292,000 General Fund decline. The town's General Fund balance stands at nearly $7 million (or 8.1% of revenues) at fiscal 2010 year-end, an amount lower than the $7.3 million available in fiscal 2009 but still able to provide the town with a reasonable budgetary cushion in the near term.

The town's proposed fiscal 2011 General Fund operating budget is approximately 3.2% larger than the previous year's and includes a free cash appropriation of $806,385 for one-time capital items. Town officials have taken a conservative approach to the 2011 budget, building in an additional $600,000 state aid reduction. Aid from the Commonwealth accounts for approximately 31.6% of the town's revenues and therefore represents an area of vulnerability that should have muted effects given the town's sound reserve levels. Current year-to-date results indicate positive revenue variance driven by increases in the economically sensitive meal and hotel taxes and in departmental revenue. The proposed fiscal 2012 budget assumes 3% growth over fiscal 2011's adopted budget and includes a $1.2 million draw on free cash to fund a one-time capital expenditure. Future rating reviews will factor in the town's ability to maintain structural balance while maintaining, at minimum, reserves in step with budgetary growth.

LARGE TAX BASE EXPERIENCING MODEST DEVELOPMENT

Moody's anticipates the town's $2.6 billion tax base valuation may stabilize in the medium term given ongoing development initiatives despite a 4.4% decrease in equalized property valuation. With proximity to the City of Springfield (G.O. rated A2/stable outlook), 90 miles west of Boston (G.O. rated Aaa/stable outlook), the town's equalized value growth has averaged 5.2% annually since 2005, including deceleration of growth rates in recent years as market values have softened given the modest impact of the recession. The town, which is 69.9% residential, also maintains a significant commercial/industrial sector accounting for 26.5% of assessed value in 2011. The town is characterized by an above average proportion of residents age 65 or older (15.9% compared with the nation's 12.4%). Wealth levels are below state averages with per capita income equal to 80.8% and median family income equal to 81.5% of state medians. Wealth levels are on par with the U.S. averages with per capita income equal to 97.2% and median family income at 100.5% of the national medians. Equalized value per capita is a satisfactory $98,001.

AVERAGE DEBT BURDEN EXPECTED TO REMAIN MANAGEABLE

Moody's expects the town's direct debt burden, equal to an average 1.4% of full valuation, will remain manageable as the average rate of retirement of existing debt allows flexibility for the town to take on additional debt, if desired. Debt service is retired at a moderately rapid pace (77.6% repaid within 10 years), and debt service comprised a low 3.1% of fiscal 2010 operating expenditures. The town has limited future capital plans for the near term but is in the preliminary planning stage for the construction of a new high school within the next three years. All of the town's debt is fixed rate and the town is not party to any derivative agreements.

What could make the rating go UP:

-Maintain structural balance and healthy reserves

-Improved tax base growth and wealth levels

What could make the rating go DOWN:

-Continued declines in assessed/equalized valuation

-Decline in general fund balance and reserves.

KEY STATISTICS

2008 Estimated population: 27,459 (-1.6% since 2000 census)

1999 Per Capita Income: $20,982 (80.8% of MA; 97.2% of U.S.)

1999 Median Family Income: $50,282 (81.5% of MA; 100.5% of U.S.)

2011 Equalized Valuation: $2.6 billion

2011 Equalized Valuation per capita: $98,001

Average Annual Growth Equalized Valuation (2005-2011): 5.2%

Overall Debt Burden: 1.4%

Payout of principal (percent repaid within 10 years): 77.6%

FY10 General Fund balance: $7.08 million (8.1% of General Fund revenues)

FY10 Available Reserves: $12.05 million (13.7% of General Fund revenues)

Long-Term G.O. debt outstanding: $36 million including the current issue

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, 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

Shannon McCue
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 Aa3 RATING TO TOWN OF WEST SPRINGFIELD'S (MA) $10.3 MILLION G.O. MUNICIPAL PURPOSE LOAN OF 2011 BONDS
No Related Data.
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