Jan 11 - Fitch Ratings has affirmed its outstanding ratings for Bristol, CT
(the city) as follows:
--$75.3 million general obligation (GO) bonds at 'AA+'.
The Rating Outlook is Stable.
The bonds are secured by the city's full faith and credit and unlimited taxing
KEY RATING DRIVERS
HEALTHY FINANCIAL PROFILE: Prudent financial management is evidenced by a
history of strong reserves, ample liquidity, and overall financial flexibility.
Fitch expects the city to adjust expenditures and raise the millage rate to
offset an expected decline in its tax base and maintain balance.
LOW DEBT LEVELS: Debt ratios are favorable and are not expected to materially
change, due to manageable future debt needs and a rapid par amortization rate.
STRONG MANAGEMENT OF OTHER LONG-TERM OBLIGATIONS: The city's pension systems
have been significantly overfunded for several years and certain excess funds
are being used to support other post-employment benefit (OPEB) costs. OPEB
liabilities are manageable.
MIXED SOCIOECONOMIC INDICATORS: Wealth levels exceed national levels, but are
below the high levels of the state. Unemployment remains above national averages
but is in line with the state average. The city's economy is somewhat
concentrated, as it is home to the headquarters of the Entertainment and Sports
Programming Network (ESPN), the city's largest employer and taxpayer.
Bristol is a suburban city located twenty miles southwest of the state capital
city of Hartford. The city has a 2012 population of 60,510.
HEALTHY FINANCIAL PROFILE
As are many cities in the state, the city is highly dependent on property tax
revenues and intergovernmental support, which represent 61% and 35% of total
general fund revenues, respectively. The city has exhibited prudent and
conservative budgeting practices in recent years and has maintained a steady
level of healthy reserves.
In fiscal 2012, the city ended with a $1 million operating surplus after
transfers. As a result, the city's unrestricted general fund balance grew to
$29.4 million, which represents a sound 15.4% of total spending. The surplus
was driven primarily by conservative budgeting, greater than expected
intergovernmental support, and increased tax collections. Management prudently
used an additional $1 million of unbudgeted one-time surplus monies to fund a
sinking fund for future capital expenditures. Unassigned general fund balance is
currently 13% of budgeted 2013 revenues, which is compliant with the city's fund
balance policy of maintaining unassigned fund balance above 10% of budgeted
The city's $183 million general fund fiscal 2013 budget saw an increase of 3.4%.
Of this increase, 2.6% was for mandatory school funding requirements imposed by
the state. Other major expenditure increases were for capital outlay and for
growing health care and workers' compensation costs. The city's tax rate was
increased by 5.5% to help offset the increase in expenditures. Notably, the city
has continued to decrease its reliance on balancing the budget with fund
balance. This budgeting practice was always out of conservatism and not need.
Budgeted use of general fund balance fell to $625,000 for fiscal 2013, down from
$725,000 in fiscal 2012 and $1.1 million in fiscal 2009. Management has
indicated to Fitch that it expects to gradually end this practice entirely over
the next few years.
SLIGHTLY CONCENTRATED ECONOMIC BASE
The city is the home of the Walt Disney Company-owned ESPN, which has its
headquarters in the city. ESPN employs over 4,000 people and accounts for 6% of
the city's fiscal 2012 taxable assessed value. This single-employer economic
concentration is somewhat mitigated by ESPN's ever growing presence in the city
and the company's strong business model. ESPN continues to expand its
headquarters with the construction of a new 193,000 square foot digital center
facility that will be completed in 2013. The city estimates that ESPN will top
5,000 employees within the next few years. Other economic drivers in the city
include its technology park and the presence of energy, manufacturing, and real
AVERAGE SOCIOECONOMIC METRICS
Income and wealth indicators are stronger than national levels but weaker than
the above-average Connecticut state medians. Median household income in 2011 was
87% and 114% of the state and nation, respectively. Unemployment as of October
2012 was 8.7%, which is higher than both state and national unemployment
levels, and is up from 8.1% a year prior. Population growth of 0.1% since 2000
lags both state and national trends.
The city is undergoing a five-year statutory revaluation of its grand list
effective Oct. 1, 2012. Management is expecting a decrease of approximately
18%. This decline is similar to other communities in the state which have
undergone revaluations and is due mostly to the decline in housing prices. The
city has the unlimited authority to adjust the millage rate; however, management
plans to first consider expenditure adjustments. Over time, the decline will
also be partially mitigated by expected additions to the grand list. For
example, Bristol Hospital, Inc. is being purchased by Vanguard Health Systems,
which will change some of the hospital's value from tax-exempt to taxable.
Additionally, as previously mentioned, ESPN continues to expand its headquarters
in the city. Tax collection rates are strong at 98.7%.
MANGEABLE DEBT BURDEN
Overall debt levels are low at $1,350 per capita and 1.3% of 2012 market value.
Future debt needs are manageable and should not materially change debt levels as
the city historically has self-funded capital maintenance and equipment needs
with reserves. Additionally, amortization of par is rapid at 74% in 10 years.
Debt service as a percentage of fiscal 2012 general fund spending was an
RESPONSIBLE MANAGEMENT OF OTHER LONG-TERM LIABILITIES
The city's employee pension systems remain over-funded despite the recent
recession. The city has not been required to make any contributions since fiscal
2007. Using Fitch's conservative 7% discount rate assumption, the city's pension
systems, in aggregate, are 155% funded as of July 1, 2011. The city is currently
using excess funding monies to pay for fire and police employee OPEB costs in
accordance with an IRS regulation that, according to management, provides for a
formulary-driven amount of excess funding over 125% that is allowed to be used
to pay for OPEB costs.
The city has continued to decrease its unfunded OPEB liability by prudently
making annual contributions that are greater than its annual pay-go costs. The
unfunded OPEB liability was $64 million as of July 1, 2010, or a low 1% of
market value. The fiscal 2012 total OPEB contribution was $4.8 million, which
represented 61% of the annual required contribution and a manageable 2.4% of
general fund spending.