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Rating Update:

MOODY'S CONFIRMS Aa2 RATING ON THE TOWNSHIP OF WARRINGTON'S (PA) GO BONDS; REMOVES WATCHLIST

08 Jun 2011

Aa2 RATING APPLIES TO $17.5 MILLION OF OUTSTANDING G.O. DEBT

Municipality
PA

Opinion

NEW YORK, Jun 8, 2011 -- Moody's Investors Service has confirmed the Aa2 rating on the Township of Warrington's (PA) $17.5 million in outstanding long-term general obligation bonds. Concurrently, we have removed the township from Watchlist. The Watchlist action was prompted by a lack of sufficient current financial and operating information, which we have since received.

RATINGS RATIONALE

The Aa2 rating confirmation reflects the expectation that the township's financial condition will stabilize over the next two fiscal years. The rating also incorporates the township's strong $3.0 billion tax base, above average wealth and income levels, and low debt burden.

STRENGTHS

- Stable tax base with strong socioeconomic indicators

- Still solid financial position augmented by available reserves outside of the operating funds

CHALLENGES

- Several consecutive draws on fund balance due to real estate transfer taxes performing under budget

DETAILED CREDIT DISCUSSION

From fiscal 2008 through fiscal 2010, the township has seen small draws on its total operating fund balance, largely due to weakness in its real estate transfer taxes. This has led to moderately lower fund balance than the township's fiscal 2007 peak of $1.8 million total operating fund balance (16.7% of operating revenues). Fiscal 2009 operations resulted in a General Fund surplus of $136,000 bringing General Fund balance to $560,000 (6.7% of revenues). Total operating funds, including the Parks and Recreation, Fire Protection, and Ambulance funds, resulting in a deficit of $458,000 driving the operating fund balance decline to a total $1.0 million (9.3% of revenues). The draft fiscal 2010 audit indicates that operations will result in a General Fund surplus of $119,000, driven by both expenditures coming in under budget and revenues being over budget. Management expects the General Fund balance will increase to an adequate $679,000 (8.6% of revenues). The total operating funds is expected to have ended the year with $231,000 operating deficit, reducing the operating fund balance to a still satisfactory $964,000 (9.1% of operating revenues). Including $900,000 available fund balance in the Capital Improvements Fund, total available fund balance is $1.8 million (17.2% of operating funds revenue). The township's liquidity position is expected to be relatively strong at $1.7 million (15.9% of revenues).

ABOVE AVERAGE DEMOGRAPHIC PROFILE WITH MANAGEABLE DEBT BURDEN

The township, located 20 miles north of the Township of Philadelphia (G.O. rated A2/stable outlook), is a mix of residential and commercial properties with full valuation of $3.0 billion in 2010. Income levels are above the state medians and full value per capita is a strong $129,676. Moody's expects that the district's lower than average 0.5% direct debt burden will be manageable given limited near-term borrowing plans. All outstanding debt is fixed rate and the township is not party to any derivative agreements.

WHAT COULD MAKE THE RATING GO UP:

- Strengthening of financial condition across all operating funds resulting in higher fund balance and increased liquidity

- Significant tax base expansion

WHAT COULD MAKE THE RATING GO DOWN:

- Final audited 2010 financial position showing weaker than expected financial condition

- Continued deficits in the operating funds contributing to declining fund balance

KEY STATISTICS:

2008 population: 23,418

2011 Full valuation: $3.2 billion

2010 full value per capita: $129,676

Direct debt: 0.5%

Payout of Principal (10 years): 56.0%

FY09 General Fund Balance: $560,000 (6.7% of General Fund revenues)

FY09 Operating Fund Balance: $1.0 million (9.3% of General Fund revenues)

Expected FY10 General Fund Balance: $676,000 (8.6% of General Fund revenues)

Expected FY10 Operating Fund Balance: $964,000 (9.1% of General Fund revenues)

Expected FY10 Available Operating Fund Balance(Includes Operating Funds and Capital Improvements Fund): $1.8 million (17.2% of Operating Fund revenues)

1999 Per Capita Income (as % of PA and US): $25,810 (123.6% and 119.6%)

1999 Median Family Income (as % of PA and US): $76,065 (154.7% and 152.0%)

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 maintaining 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

Matthew Wong
Analyst
Public Finance Group
Moody's Investors Service

Jessica A. Lamendola
Backup Analyst
Public Finance Group
Moody's Investors Service

Patrick Mispagel
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Jack Dorer
Director
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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USA

MOODY'S CONFIRMS Aa2 RATING ON THE TOWNSHIP OF WARRINGTON'S (PA) GO BONDS; REMOVES WATCHLIST
No Related Data.
© 2019 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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