Jan 3 - Fitch Ratings has affirmed the following Westerville, Ohio (the city) bonds: --$2.5 million general obligation limited tax bonds (LTGOs), series 2003A at ‘AAA’; --$1.6 million general obligation unlimited tax bonds (ULTGOs), series 2003B at ‘AAA’; --$890,000 GO various purpose limited tax bonds, series 2004 at ‘AAA’. The Rating Outlook is Stable. SECURITY The ULTGO bonds are secured by a voter-approved debt service millage, outside the general operating millage, that is adjusted to yield sufficient revenue to pay debt service payments. The LTGO bonds are secured by a levy of ad valorem property taxes within the ten-mill operating limitation imposed by Ohio law. KEY RATING DRIVERS DEEP AND DIVERSE ECONOMY: The city’s strong and diverse economic base benefits from its proximity to the Columbus metropolitan area, which provides abundant employment opportunities to supplement those offered within the city. STRONG MANAGEMENT: City officials demonstrate proactive and effective financial stewardship. AMPLE FINANCIAL FLEXIBILITY: The city has consistently maintained sound reserve and liquidity levels and systematically uses surplus and designated tax revenues for pay-as-you-go capital funding. AVERAGE LONG-TERM OBLIGATIONS: The aggregate debt burden is average, principal amortization is rapid, and future capital needs appear reasonable. NO RATING DISTINCTION: Fitch makes no rating distinction between the ULTGO and LTGO bond ratings, in light of the city’s high level of financial flexibility. CREDIT PROFILE The city is located in Franklin and Delaware counties, approximately 15 miles northeast of the state capital, Columbus (Fitch ULTGO rating ‘AAA’; Outlook Stable). The city has a 2011 population of 36,665. DEEP AND DIVERSE ECONOMY The city is anchored by a stable and growing economic base largely composed of financial, healthcare, and education sectors. Significant facilities investment by the healthcare and financial services sector, namely Mount Carmel St. Ann’s hospital - which recently added a new $100 million 60-bed tower - OhioHealth, and JP Morgan Chase, is expected to add to the city’s expanding employment base, with an additional 670 new jobs over the next few years. The city’s socioeconomic indicators are healthy, with a median household income 173% and 158% of state and national averages, respectively. The city’s October 2012 unemployment rate of 4.9% continues to decline, and is well below comparable state and national averages of 6.3% and 7.5%, respectively. Taxpayer concentration is low, with the top ten taxpayers representing less than 5% of assessed value. STRONG RESERVES The city’s financial position was bolstered by the passage of a voter-approved permanent increase in its income tax rate to 2.0% from 1.25%, effective in 2009. Income taxes accounted for 58% of total general fund revenue in 2008, and 67% in 2011, after the rate increase. The city closed fiscal 2011 with a general fund operating surplus of $5.8 million or 20.3% of general fund spending. This is the fifth consecutive operating surplus for the city, and adds to an already ample general fund balance, which increased to $38.4 million. The unrestricted general fund balance (the sum of committed, assigned and unassigned as per GASB 54) was $26.4 million, or equal to a robust 93% of general fund spending. Unaudited results as of Nov. 30, 2012 show a $5.2 million general fund operating surplus on a cash basis for fiscal 2012, due to positive budgetary variances. This results in a general fund cash balance of $26 million, $25 million of which is unrestricted, equal to a strong 83% of general fund spending. The city has budgeted for modest average annual expenditure growth of 3.2% over the next five years, which includes zero growth in net staffing. Additionally, the city conservatively budgeted for a minimal 1.4% increase in income tax revenue for fiscal 2012, whereas actual growth was 5.4%. The city will start collecting income taxes in fiscal 2013 from businesses within neighboring Blendon Township as a result of a Joint Economic Development Zone Agreement approved by voters in November 2012. The program is expected to yield approximately $400,000 annually in income tax revenues. Fitch notes positively that the city did not incorporate this growth into its five-year plan (2013-2017). Fitch views favorably the city’s policy to maintain a general fund balance equal to 50% of expenditures and transfers out. The city’s five-year plan includes successful compliance with the policy, which Fitch believes is reasonable given the city’s history of conservative budgeting, the general expansion of the city’s economic base, and modest expenditure growth. The city retains flexibility to decrease expenditures if necessary, primarily by delaying capital projects. AVERAGE DEBT PROFILE Overall debt levels are average, at $2,409 per capita and 3% of market value, largely due to overlapping school debt. Amortization is rapid with 87% retired in 10 years. The debt service burden is manageable and equal to 10.5% of fiscal 2011 expenditures. Given the city’s extensive use of pay-as-you-go funding for capital improvements, future borrowing is reasonable and the city’s capital improvement plan includes $17.7 million of new debt issuance for general capital improvements through 2017. The city contributes to the Ohio Public Employees Retirement System (OPERS) and the Ohio Police and Fire Pension Fund (OP&F) to fund both pension and OPEB. Both OPERS and OP&F are cost-sharing, multiple-employer defined benefit pension plans. The city historically fully funds its required contribution to both pension funds, and the city contributed 100% of the required contribution for 2011. The city’s contributions to OPERS and OP&F equaled 10.5% of 2011 spending. Carrying costs for debt service, pension and OPEB equaled a moderate 21% of 2011 spending.