Aaa RATING APPLIES TO $152 MILLION IN PARITY DEBT, INCLUDING CURRENT OFFERING
General Obligation Bonds, Series 2010B
Expected Sale Date
NEW YORK, Oct 11, 2010 -- Moody's Investors Service has assigned a Aaa rating to the Town of
West Hartford's (CT) $8 million General Obligation Bonds, Series 2010B.
Concurrently, Moody's has affirmed the Aaa rating on the town's outstanding
general obligation debt, affecting $144 million. The bonds are secured by the
town's general obligation unlimited tax pledge.
The rating assignment and affirmation of Moody's highest rating reflects the
town's sizeable and diverse equalized net grand list (ENGL), sound financial
position bolstered by reserves held outside of the General Fund, track record of
prudent fiscal management and an above-average debt burden governed by a
comprehensive capital plan. The current issue will finance various municipal and
school capital projects.
SATISFACTORY FINANCIAL POSITION SUPPORTED BY FLEXIBILITY OUTSIDE OF
GENERAL FUND; FUNDED STATUS OF PENSION SYSTEM REDUCED
West Hartford's financial position is expected to remain sound given
management's close fiscal oversight, prudent use of reserves and adequate
fund balance levels. The town has generated operative surpluses in five of the
last six fiscal years, increasing undesignated General Fund balance to $16.3
million (a satisfactory 7.4% of revenues) in fiscal 2009, from $11.2 million
(6.7% of revenues) in fiscal 2004. The increase reflects the town's
consistently conservative budget practices and strict spending controls.
Fiscal 2009 ended with a modest $340,000 (0.2% of revenues) reduction of General
Fund balance as the town was unable to fully replenish is $781,000 of budgeted
reserves due primarily to lower than budgeted revenues and greater than
anticipated health claims.
The fiscal 2010 budget represented a $612,000 reduction from the prior year. The
budget was balanced without the use of reserves through a combination of
property tax revenue growth and expenditure reductions including wage
concessions with all municipal employee unions and the elimination of 10
full-time and 13 part-time positions. Unaudited fiscal 2010 results indicate
positive operations at year-end in excess of $800,000, with undesignated General
Fund balance increasing to a pro-forma $17.1 million (8% of revenues). The town
benefited from strong property tax collections (99.1%), greater than budget
building permit revenues and expenditure savings.
Of note, the town's financial position is strengthened by available reserves
held outside the General Fund. These reserves include the Health Care Reserve
($5.1 million), Capital Non-Recurring Fund ($392,000), Self- Insured Reserve
($947,000) and Utility Reserve ($1.9 million). Including these funds the town's
fiscal 2009 available reserve balance increases to $24.7 million or 11.1% of
revenues. The combined balances of these funds increased modestly as of the end
of fiscal 2010. The adopted fiscal 2011 budget does not include the use of
General Fund balance and represents an increase of $6.4 million or 3.0% above
the prior year. The budget is budgeted primarily with increased property tax
revenues (2.2% or $6.2 million growth) and incorporates expenditure growth
driven largely by increases in education and public safety costs.
Reflective of West Hartford's proactive nature, the town established a Health
Care Reserve to fund Other Post Employment Benefits (OPEB) in 1985. The town did
not make a retiree health insurance contribution from the General Fund for
fiscal years 2003 and 2004, but continued to pay such claims from the Health
Care Reserve. Additionally, the town only partially funded the actuarially
determined annual required contribution (ARC) in fiscal 2005 and 2006. As a
result, the town reduced the Health Care Reserve to $11.8 million in fiscal 2006
from its peak position of $30 million in fiscal 1999. The reserve ended fiscal
2009 with a $5.1 million balance which is expected to remain stable at the end
of fiscal 2010. A $6.6 million contribution to the Health Care Reserve has been
budgeted for fiscal 2011, approximating the ARC as of the 7/1/07 actuarial
analysis. The town's current unfunded OPEB liability is approximately $87
million. Additionally, in fiscal 2009, the town established an OPEB trust fund
for employees hired after 2003. In order to reduce future OPEB costs significant
plan adjustments such as increased normal retirement age and employee
contributions have been implemented for approximately 22% of the nonpublic
safety unionized workforce.
The town's pension funded ratio has declined considerably over the last ten
years to a low of 55.4% as of July 1, 2010 from over 128% in 2000. While the
most recent reduction was due largely to poor market performance the funded
status of town's pension system is below average and inconsistent with the Aaa
rating category. Positively, the town continues to make 100% of its
annually required contribution.
SIZEABLE AND DIVERSE EQUALIZED NET GRAND LIST EXPECTED TO REMAIN STABLE
Moody's anticipates that the town's sizable $7.3 billion ENGL will remain stable
as growth slows due to recessionary economic conditions. The town is
characterized by a diverse economic base (70% residential, 14% commercial
/industrial) and major employers within the town include a variety of higher
education institutions, manufacturing firms and health providers as well as a
commercial sector. The town's net grand list expanded at an average annual rate
of 6.4% over the last five years capturing property value appreciation as
well as some residential growth and commercial activity. The
10/1/2006 revaluation was initially being phased in over five years and in
fiscal 2008 and fiscal 2009 the town experienced an increase in its net
grand list of 21.2% and 8.7%, respectively. However, following a state
legislative change in fiscal 2009, West Hartford decided to suspend its phase-in
of revaluation assessments. As such, the town reverted to the 10/1/2007 grand
list for fiscal 2010, which was then adjusted for new growth. The town will have
its next revaluation by 10/01/2011, as mandated by the state, and will be
reflected in the fiscal 2013 fiscal year. Of note, net grand list growth
remained positive for fiscal years 2010 and 2011 at 1.3% and 1.0%, respectively.
Supporting recent tax base growth has been the development of the Blue Back
Square, a $198.8 million mixed-use private/public development in the town
center. The project was completed in spring 2009 and some highlights of this
substantial project entail two parking garages, 70 high-end residential
condominiums, and several major retailers. Using proceeds from a previous
$48.8 million bond sale, the project also incorporates improvements to the town
hall and library, as well as streets, sidewalks, and public areas. The Blue Back
Square site has also spurred ancillary development, the refurbishment of
existing commercial properties, and various residential projects.
Wealth levels in West Hartford, though above state medians, fall below Aaa
medians, as reflected in the $121,211 ENGL per capita. The Connecticut Aaa
median ENGL per capita is a significant $272,460. The per capita (PCI) and
median family incomes (MFI), as a percent of the nation, are also significantly
below similarly rated credits at 155% and 156%, respectively. The Aaa median PCI
and MFI as a percent of the nation is a higher 233% and 220%, respectively.
Moody's believes that this wealth profile is offset by the town's
considerable economic redevelopment in the town center, coupled with a very
strong management team and fiscal stability.
ABOVE AVERAGE DIRECT DEBT BURDEN
Moody's expects the town's above average 2.1% (of ENGL) direct debt burden will
remain slightly elevated relative to similarly rated municipalities. However,
debt levels will continue to be manageable given the town's healthy principal
payout of 73% retired within 10 years and reduced borrowing. Further,
debt service for the $48.8 million G.O. bonds issued for the construction of
Blue Back Square is expected to be paid from revenues generated by the new
parking structures and special services district taxes mitigating the impact on
the General Fund. Reflecting the strength of the community's strategic planning
efforts, West Hartford maintains a 12-year capital improvement plan totaling
$151 million that has provided an important framework for identifying the
timing and financial resources necessary to meet capital needs.
Additionally, the town plans to apply the proceeds from a recently settled
lawsuit to reduce a spike in debt service costs over the next three fiscal
years. The use of the one-time proceeds is not anticipated to impact
operations as the last allocation of litigation proceeds corresponds with a
drop in debt service in fiscal 2014. The town has no significant
near-term borrowing needs.
The town is a member of the Metropolitan District Commission (MDC), a special
district in Hartford that provides water and sanitary services to eight member
towns. The town's overall debt increases to a moderate 2.5% (of ENGL) when
incorporating overlapping debt associated with the MDC. The MDC has been cited
by the U.S Environmental Protection Agency and the United States Department of
Justice for overflows from the sewer systems. The abatement plans call for new
sewers, removal of storm water flows during storm events, and
additional treatment capacity. Each of the eight member towns has
overwhelmingly approved an $800 million authorization to begin stage one of
the project. This debt is not expected to place fiscal strain on the town's
General Fund operations since the project will be funded through user surcharges
on the individual customer's quarterly bills.
WHAT COULD CHANGE THE RATING - DOWN?
-- Departure from the town's track record of conservative fiscal and debt
-- Financial or economic weakening that cause the town to draw down reserves to
levels inconsistent with the Aaa rating category.
2008 Population: 60,495
Fiscal 2009 Equalized Net Grand List: $7.3 billion
Fiscal 2009 Equalized Net Grand List Per Capita: $121,211
Median Family Income: $77,865 (156 % of the nation, 119% of Connecticut)
Per Capita Income: $33,468 (155% of the nation: 116% of Connecticut)
Fiscal 2009 General Fund Balance: $16.8 million (7.6% of General Fund Revenues)
Fiscal 2009 Unreserved General Fund Balance: $16.3 million (7.4% of General Fund
Fiscal 2009 Available Reserves (includes Unreserved General Fund
Balance, Capital Non-Recurring Fund, Health Care and Utility Reserves): $24.7
million (11.1% of General Fund Revenues)
Overall Debt Burden: 2.5%
Payout of Principal (10 years): 73%
Post-sale parity debt outstanding: $152 million
The principal methodology used in rating the Town of West Hartford, 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
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.
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Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Senior Credit Officer
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
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MOODY'S ASSIGNS Aaa RATING TO WEST HARTFORD'S (CT) $8 MILLION GENERAL OBLIGATION BONDS, SERIES 2010B
Moody's Investors Service
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