Nov 14 - Fitch Ratings affirms the following rating for the town of
Griswold, Connecticut (the town):
--$19.2 million general obligation (GO) bonds at 'AA-';
The Rating Outlook is Stable.
The bonds are a general obligation of the town and backed by its full faith and
credit and unlimited taxing authority.
KEY RATING DRIVERS
FINANCIAL LIQUIDITY REDUCED, BUT RESERVES REMAIN SOUND: Despite recent declines
due to three years of net operating deficits, reserve levels remain adequate. To
balance the budget and strengthen reserves, management has recently imposed
property tax increases.
AVERAGE SOCIO-ECONOMIC METRICS: Wealth levels are slightly below state levels
but exceed national averages. Unemployment levels remain average.
POTENTIAL COMMERCIAL EXPANSION: New projects are in the planning stages due to
management's efforts to promote new business expansion and spur tax base growth.
MODERATE DEBT PROFILE: Overall debt levels are moderate and are expected to
remain so as the town has minimal future borrowing plans.
RETIREE COSTS ARE MANAGEABLE: Annual pension and other post-employment benefit
(OPEB) costs are not expected to pressure the credit in the near future.
ECONOMIC BASE EXPANDING
Griswold, with a population of 11,951, is a rural residential town that covers
37 square miles in New London County in southeast Connecticut. The town, which
was traditionally geared toward manufacturing, has observed a recent increase in
commercial development. Newly approved projects include an assisted living
facility, a new hotel, and residential developments. The town has been providing
tax incentives to commercial developers who meet certain criteria.
AVERAGE SOCIO-ECONOMIC METRICS
The town's 2010 median household income was 88% and 114% of the state and
national medians, respectively. The unemployment rate was 9.2% for September, up
slightly from 9.1% the year prior and above the state's rate of 9.0% for the
same period. The town's population growth and slow housing recovery are both
comparable to national trends.
Griswold most recent tax base revaluation, effective Oct. 1, 2011, led market
value to decline 16% to an approximate $697 million, which reflects the general
downward trend of housing prices. The decline in assessed value does not affect
management's ability to levy sufficient property taxes however, as it can adjust
the millage rate upward to ensure sufficient revenues.
FINANCIAL LIQUIDITY REDUCED, BUT RESERVES REMAIN SOUND
The town is heavily dependent on property taxes and state support, which
represented 49% and 43% of fiscal 2011 general fund revenues, respectively. Both
of these main revenue sources fell short of the 2011 budget, with total tax
revenues underperforming the budget by 4.7%, or $720,212, and intergovernmental
revenues underperformed by 2.1%, or $287,644. The town reduced expenditures to
offset the lower than budgeted revenue performance. For fiscal 2011, the town
experienced a net operating deficit after transfers of $1.2 million, which
includes the appropriation of $600,000 of fund balance. Pursuant to new GASB 54
accounting rules, the general fund was required to absorb the town's Public
Health Nursing Fund which had a negative fund balance of $360,000. Therefore,
total fund balance declined approximately $1.5 million. Unrestricted fund
balance (the sum of committed, assigned and unassigned as per GASB 54) totaled
$3 million, or 9.2% of spending. Unassigned general fund balance declined to $2
million, equal to an adequate 6.1% of spending. The town strives to maintain an
undesignated/unassigned fund balance in the range of 8.5% to 17% of spending,
and the town is working to increase balances back within this range.
The fiscal 2012 tax levy increased 0.8%. In fiscal 2012, management included a
$605,000 appropriation of fund balance to help offset expected decreases in
state support. Revenues continued to underperform; in particular, planned
tuition revenues and school aid reimbursements came in below budget but were
offset by reductions in expenditures. The fiscal 2012 unassigned fund balance
remains below the fund balance policy range.
The town balanced the fiscal 2013 budget with a $1.8 million (11.8%) increase in
the property tax levy intended to offset a projected $832,000 decrease in state
funds and eliminate use of fund balance for operations. Capital costs were also
increased by $285,000. Tax collections have been perennially strong and are
projected to remain around 98% for fiscal 2013. Management also reports that
expenditures should remain fairly consistent going forward with no major
expenditure items expected in the future.
MANAGEABLE LONG-TERM OBLIGATIONS
Overall debt is moderately low at $2,009 per capita and 2.4% of market value.
Annual debt service costs represented a low 5.9% of fiscal 2011 general fund
spending and are projected to remain at this level. The town has no other future
debt plans and historically has only issued debt for school projects. The town
has no variable rate debt. Debt amortization rates are moderate with 52.3% of
principal retired within 10 years.
The town has minimal future capital expenditures that will be funded on a
pay-as-you-go basis and with state grants. The largest expenditure is a new high
school roof estimated to cost $840,000 after potential state grant
reimbursements. The town has been setting aside cash to cover this cost and will
continue to do so over the next few years.
The town contributes to the state-wide Municipal Employees' Retirement System
(MERS), which is a cost sharing multiple employer defined benefit plan. The
town's fiscal 2012 contribution was $484,000, representing a manageable 1.5% of
total general fund spending. Annual pay-go costs for OPEB obligations were
$110,604 in fiscal 2011, or 35% of the ARC. The OPEB unfunded liability totaled
$2.0 million as of July 1, 2010, or 0.2% of market value. Fitch does not expect
post-employment obligations to pressure the credit.