Fitch Rates Greenwich, CT's $21MM 2008 GO Refunding Bonds 'AAA'
Fitch Ratings has assigned an 'AAA' rating to the town of Greenwich, Connecticut's approximately $21 million general obligation (GO) refunding bonds, issue of 2008. The bonds are expected to sell via negotiation the week of April 7, with proceeds refunding the series 2003 bonds. In addition, Fitch affirms the rating on the town's approximately $11.4 million of outstanding GO bonds at 'AAA'. The Rating Outlook is Stable.
Greenwich's superior 'AAA' rating reflects a considerable resource base, highlighted by exceptional wealth levels. The town's sizeable unreserved general fund balance deficit is due to its atypical method of funding capital projects on a modified pay-as-you-go basis, and Fitch believes a planned increase in debt financings will result in a positive fund balance within four fiscal years. Low overall debt ratios, resulting from a long history of funding nearly all capital expenditures from current resources, will increase with this change, but expected debt issuances are manageable and expected to be retired promptly.
Greenwich is located in southwestern Connecticut, only 28 miles from New York City, and is one of the most affluent communities in the nation. Per capita money income levels are more than twice that of the state and three times that of the nation. Many of the town's 62,077 residents (2006 estimate) are executives and professionals working locally, in surrounding Fairfield County communities, or in New York City. The unemployment rate as of January 2008 was 3.3% (preliminary), well below the state and national rates, reflecting the depth of employment opportunities. The town's $33.8 billion tax base, the largest of any municipality in Connecticut, is chiefly residential, although a substantial commercial component is made up of office space and higher-end retail properties. Underlining the substantial tax base is a $2.2 million average home price and a very high market valuation per capita ratio of $778,677.
Greenwich's financial strength stems from its deep, stable resource base. Officials have been able to plan multiyear capital and operating budget commitments with a high degree of certainty that resources will be available when needed. The fiscal 2007 unreserved general fund balance deficit equalled $43.4 million, or -11.9% of spending, and stems from the town's historical practice of appropriating the full cost of each capital project in one year and raising revenue to offset the appropriation in the same and subsequent four fiscal years. The town now plans to more broadly utilize debt financings and Fitch expects that planned 3.5% annual mill rate increases will provide sufficient funds to both eliminate the deficit over the near term and sustain balanced operations going forward. The town's substantial general fund operating surpluses ($33.8 million in fiscal 2007) provide a degree of financial flexibility during the transition period in fiscal years 2008-2011. Fitch does not believe the recent decision to increase debt financing of capital needs will reduce future financial flexibility, as the town has ample debt capacity and amortization should be very rapid. Annual budgets are designed to produce considerable operating surpluses and to provide for discretionary capital outlay. The fiscal 2009 general fund budget grew by 5.11% over the prior fiscal year and includes a 3.48% mill rate increase; officials expect to end the current fiscal year with a sizeable unreserved general fund balance gain.
The town's debt ratios are moderately low on a per capita basis ($1,395) and extremely low relative to taxable market value (0.18%). The strength of the latter ratio underscores Greenwich's considerable financial resources to meet expected debt needs. Principal amortization is very rapid at 75.4% within 10 years, reflecting a town policy to amortize almost all debt within five years. The town recently moved to a 15-year capital improvement plan (CIP) to facilitate long-term planning; the CIP anticipates $538.8 million of capital costs through fiscal 2023, which will be funded by pay-as-you-go sources, as well as the issuance of approximately $309 million of GO bonds through fiscal 2017. Pensions are fully funded, and the town's $17.4 million of other post-employment benefits fund assets partially mitigate a manageable $113.7 million liability.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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