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MOODY'S ASSIGNS Aaa RATING TO WALLINGFORD'S (CT) $4.8 MILLION GENERAL OBLIGATION BONDS, SERIES 2011

03 May 2011

RATING AFFECTS $45 MILLION IN OUTSTANDING PARTIY DEBT

Municipality
CT

Moody's Rating

ISSUE

RATING

General Obligation Bonds, Issue of 2011

Aaa

  Sale Amount

$4,880,000

  Expected Sale Date

05/15/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, May 3, 2011 -- Moody's Investors Service has assigned a Aaa rating to the Town of Wallingford's (CT) $4.8 million General Obligation Bonds, Issue of 2011. Concurrently, Moody's has affirmed the Aaa rating on the town's outstanding bonds, affecting $45 million in parity debt. This issue is secured by the town's general obligation, unlimited tax pledge. Proceeds from the bonds will be used to fund various town and school improvements.

SUMMARY RATING RATIONALE

The Aaa rating heavily weighs the town's historically sound, albeit reduced, financial position characterized by satisfactory reserve levels. The rating also reflects the town's sizable and economically diverse tax base with wealth indices below state and national Aaa medians, and low debt position.

STRENGTHS

-Stable tax base and underlying economy

-Sound financial position bolstered by non-General Fund reserves

CHALLENGES

-Maintenance of financial stability amidst rising spending pressures

DETAILED CREDIT DISCUSSION

RECENT RESERVE REDUCTIONS PRESSURE TOWN'S HISTORICALLY STRONG FINANCIAL POSITION; FINANCIAL FLEXIBILITY BOLSTERED BY OUTSIDE RESERVES

Moody's believes that Wallingford's financial condition will remain pressured over the near term as recurring expenditure demands and ongoing fund balance appropriations challenge the town's ability to maintain structural balance and grow reserves in step with budgetary expansion. Fiscal 2010 resulted in an approximately $406,000 operating deficit due to a mid-year cut in educational state aid which the town was unable to offset fully. Ending unreserved fund balance equaled $19.2 million or 13.5% of General Fund revenues.

Fiscal 2011 experienced a slight 0.1% decrease in budgetary spending resulting from attrition and a soft hiring freeze. In addition, the budget included a $5 million fund balance appropriation of which the town expects to replenish the majority. Town officials project ending unreserved fund balance to equal approximately $18.7 million or 13% of revenues, in line with the town's 10% fund balance policy. For fiscal 2012, the town anticipates a largely flat budget that will include reductions in headcount to offset contractual salary increases and a $4.6 million fund balance appropriation, which the town expects to replenish. Looking forward, management's ability to maintain adequate financial flexibility by offsetting rising spending pressures will be a key rating driver. Inability to do so would likely exert downward rating pressure as it would represent an erosion of the district's financial credit profile.

Although General Fund flexibility remains below Aaa medians, the town's financial profile is augmented by the town's Capital Non-Recurring (CNR) and CRRA Distribution Funds. While the $3.4 million in the CNR fund and the $5.4 million in the CRRA Distribution fund are not fully fungible, it can be tapped for various capital expenses and debt service, providing some budget relief, if needed. Fiscal 2010 flexibility improves to a stronger $28 million or 19.7% of revenues when including these non-General Fund sources.

Additionally, as of July 1, 2009, the town maintained an adequate 69% funded pension liability, down more than 20% from historic levels due to investment losses. However, the town continues to contribute its full actuarially recommended contribution which was $3.6 million for fiscal 2010, which Moody's views favorably.

SIZEABLE TAX BASE EXPECTED TO REMAIN STABLE

Located along the New Haven-Hartford corridor, on Interstate 91, growth in the town's $6.7 billion tax base has averaged a modest 2.2% annually since 2005, including a 4.3% decline in fiscal 2010 reflecting regional housing trends. Although the town anticipates a 3% decline in its equalized net grand list for fiscal 2012 as a result from its recent October 2010 revaluation, officials expect stable to minimal grand list growth going forward.

The local economy remains stable and is anchored by the health care and pharmaceutical industries. Although the town's wealth indicators are at or below state averages, they remain above the nation. Per capita income levels were 90% of state average and 120% of the nation. Likewise, median family income equaled 104% of state averages and 137% of the national average.

FAVORABLE DEBT BURDEN EXPECTED TO BE MAINTAINED

Moody's believes that the town's favorable 0.7% overall debt position will remain low given its rate of principal amortization (76% in 10 years), phased-in borrowing needs and ongoing pay-as-you-go capital spending. The town conducts a significant amount of capital spending through its Capital Non-recurring Fund (CNR), mitigating the impact on the General Fund as the CNR is funded with monies collected by the electric system. The town anticipates future debt to fund roof replacements for its school board. The town is not a party to swaps or other derivative products

KEY STATISTICS

2009 Population: 44,881

Fiscal 2010 Equalized value: $6.7 billion

Per Capita Income: $25,947 (90.2% of the state, 120.2% of the U.S.)

Median Family Income: $68,327 (104.3% of the state, 136.5% of the U.S.)

Overall debt burden: 0.7%

Payout of principal (10 years): 76%

FY2010 Total General Fund balance: $20.3 million (14.1% of revenues)

FY2010 Unreserved General Fund balance: $19.2 million (13.5% of revenues)

FY2010 CNR Fund balance: $3.4 million

FY 2010 CRRA Distribution Fund balance: $5.5 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 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

Dora Lee
Analyst
Public Finance Group
Moody's Investors Service

Conor McEachern
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
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS Aaa RATING TO WALLINGFORD'S (CT) $4.8 MILLION GENERAL OBLIGATION BONDS, SERIES 2011
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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