2008-07-23 04:25:07 -
- Fitch Ratings assigns an 'A-' rating to the City of Meriden, Connecticut's (the city) $33.1 million general obligation (GO) bonds, issue of 2008. The bonds are scheduled for competitive sale on July 24. Bond proceeds will fund various general purpose projects and permanently finance a portion of bond anticipation notes maturing Aug. 1, 2008. In addition, Fitch affirms the
rating on the city's $78.7 million in outstanding GO bonds at 'A-'. The Rating Outlook is Stable.
The 'A-' rating reflects continued improvement in liquidity and financial reserves, a moderately low debt profile with rapid amortization of principal, and some success in economic development initiatives which somewhat mitigates the historically weak economic base. The city has demonstrated a willingness to raise recurring revenues, and efforts to formalize financial and debt policies, and improve the capital planning process, should provide for enhanced fiscal monitoring. Sound budgeting practices and financial management are expected to continue producing stable operating results and improved fund balance levels.
Meriden is situated 20 miles from both Hartford and New Haven, and benefits from direct access to major highways in Connecticut. Its location and accessibility bode well for the city's economic development efforts, which continue to focus on attracting new businesses and reclaiming and rehabilitating existing land and properties for future development. The city is also increasingly focused on transit-oriented development, as the planning process for a commuter rail line from New Haven to Springfield is underway at the state level; commuter rail service would complement the city's current Amtrak service. Meriden's net taxable grand list increased a substantial 49.1% during the recent revaluation, effective fiscal 2008, compared to growth of 20.0% during the previous revaluation effective in fiscal 2003. While the growth may be partially attributable to successful economic development efforts in the city, significant increases in taxable value have been common nationwide over the past five years as the housing market has appreciated, and Meriden realized this growth during the revaluation. Although the city's unemployment rate has been declining on an annual basis since 2003, it remains above-average relative to the state and nation. The unemployment rate increased year-over-year to an above-average 6.1% in April 2008, consistent with the national economic trend. Meriden's population has increased roughly 2% since the 2000 census and income levels are below those of the county, state, and nation.
The city's financial position has improved in recent years, marked by increased reserve levels and enhanced efficiency in governmental operations. Fiscal 2007 ended with an unreserved general fund balance of 2.1% of expenditures, transfers out, and other uses. The city is considering a formalized fund balance policy that would target a reserve level of 10% of expenditures, with the undesignated balance to equal 5% of expenditures. The city has improved collections of its primary revenue source, property taxes, and continues to demonstrate a willingness to raise recurring revenues. City officials undertook an operational review during fiscal 2008, identifying numerous spending cuts and increased efficiencies that are expected to provide recurring savings. While not currently available, audited results for fiscal 2008 are expected to show a small surplus in the general fund.
Meriden's moderately low debt burden is one of its key credit strengths. Direct debt is $1,524 per capita and 1.7% of full market value. While the city's capital needs appear manageable and steps have been taken to improve the planning process, the multi-year capital improvement plan (CIP) only shows funding of projects in the first year. The city continues to work on a more detailed CIP with multi-year funding sources. The debt service burden on the budget remains affordable at 7.9% of spending, despite rapid debt amortization, with 84.6% of principal retired in 10 years.
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.
Fitch Ratings, New York
Alexandra Knight, 212-908-9181
Jessalynn K. Moro, 212-908-0608
Sandro Scenga, 212-908-0278 (Media Relations)
