11/7/11 1:22 PMFitch Ratings | Press ReleasePage 1 of 3http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?print=1&pr_id=729941
Fitch Rates Danbury, CT Refunding GOs 'AAA'; Outlook Stable
Ratings
04 Oct 2011 3:34 PM (EDT)Fitch Ratings-New York-04 October 2011: Fitch Ratings has assigned the following rating to the City of Danbury, CT's (the city)general obligation (GO) bonds:--$14.84 million GO refunding bonds, issue of 2011, at 'AAA'.The bonds are scheduled to price this week via negotiation.In addition, Fitch affirms the city's following ratings:--Approximately $166 million outstanding GO bonds at 'AAA';--$2 million outstanding GO notes, series 2011, at 'F1+'.The Rating Outlook is Stable.SECURITYThe bonds and notes are a full faith and credit obligation of the city backed by its unlimited taxing power.KEY RATING DRIVERSAbove-Average Socioeconomic Indicators: The city's economic profile is strong with a broad economic base, continued economicdevelopment, above average wealth levels and low unemployment.Strong Financial Flexibility: Despite moderate draws on reserves in recent years, Danbury has consistently maintained strong fundbalance levels.Low Debt Levels: The debt burden is low and is expected to remain so given the rapid amortization of existing debt and the city'smanageable debt plans.Above-Average Pension Funding: Pension and other post employment benefits (OPEB) are well managed as illustrated by the city'shigh pension funding levels.CREDIT PROFILEDanbury is the largest city in northern Fairfield County and is easily accessible to New York City, Hartford and Norwalk, all of whichare within 60 miles. The city benefits from continued economic development and 8% population growth over the prior decade to80,893, enhancing its role as an important regional employment and retail center. The city's tax base, with a current $11 billionmarket value, has benefited from several significant economic development projects in the health care and pharmaceuticalmanufacturing sectors, including the recent expansions of Boehringer-Ingelheim and MannKind Bio Pharmaceuticals Corporation.Danbury Hospital has completed its merger with the New Milford Hospital and has been undertaking expansion efforts. The retailsector is also well-represented as the city is home to the Danbury Fair Mall, the largest retail mall in New England. The city'sunemployment rate has declined to 7.6% for July 2011 from 8.1% the year prior and compares favorably with the state (9.2%) andnational (9.3%) averages. Income levels register comfortably above the national average and have strengthened in recent yearsrelative to those of wealthy Fairfield County and the state of Connecticut.The city maintains a healthy level of financial flexibility with consistently sound reserves, despite a moderate use of fund balance for the past three audited years. Danbury's stable revenue base includes a high proportion of property taxes, which make up 71% of general fund revenues. Fiscal 2010 ended with a $1.17 million draw on fund balance, lowering the unreserved fund balance to$23.8 million or 9.6% of spending, well within its policy limit of 5%-10%. Estimated fiscal 2011 results indicate a small estimated useof $122,000 in reserves, much less than the $2.5 million appropriated, because of the successful sale of a city asset and tightspending controls. The unreserved fund balance is expected to remain sound at $23.6 million, remaining within 9%-10% of expenditures due to a decrease in spending.The fiscal 2012 budget includes $2.9 million of one-time revenues from a planned asset sale of vacant land, and the use of $2.4
11/7/11 1:22 PMFitch Ratings | Press ReleasePage 2 of 3http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?print=1&pr_id=729941
million of fund balance. If fully drawn upon, this would result in a still healthy unreserved fund balance of 9.8% of budgetedspending. The adopted budget for fiscal 2012 includes a 3.5% mill rate increase which will generate an additional $6.7 million tosupport expenditure increases in education ($1.1 million), pension costs ($2.4 million), debt service ($3.1 million) and employeebenefits ($0.4 million). The budget also includes $1.1 million for capital improvements and $450,000 for contingencies.Debt levels are low and are expected to remain so given the city's conservative debt policies, limited bonding plans andmanageable capital needs. Amortization is strong with nearly 70% of principal retired in 10 years. The city's fiscal 2012-2016 capitalplan totals $270 million, although the city expects actual capital spending to be lower as some projects will be scaled down or cancelled. The city has $18.6 million of authorized/unissued debt remaining as well as its annual $3 million allowance for non-referendum approved debt. The city plans on issuing approximately $40-$50 million of bonds over the next five years for city andschool projects and plans to go out for referendum in March 2012 for an initial $10-15 million issue.The city's pension funding levels remain strong. On an aggregate basis, the city's six pension plans are 94% funded, using the city's8% assumed investment rate. Adjusting for Fitch's more conservative 7% discount rate assumption, funding remains high at 85%.For fiscal 2012, the city's contribution for its pension plans increased to $7.8 million, up $2.4 million from $5.3 million in fiscal 2011,but still represents a low 3.6% of budgeted spending. Other post employment benefit (OPEB) liabilities are manageable. The cityhas prudently set aside $1.2 million in a reserve in anticipation of establishing a trust in the future.Contact:Primary AnalystKevin DolanDirector +1-212-908-0538Fitch, Inc.One State Street PlazaNew York, NY 10004Secondary AnalystStephen FridayAnalyst+1-212-908-0384Committee ChairpersonSteve MurraySenior Director +1-512-215-3729Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526, Email: cindy.stoller@fitchratings.com.Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, andtherefore, Fitch has been compensated for the provision of the ratings.In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed byinformation from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com,and National Association of Realtors.Applicable Criteria and Related Research:--'Tax-Supported Rating Criteria', dated Aug. 15, 2011;--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 15, 2011.
Applicable Criteria and Related Research:
Tax-Supported Rating CriteriaU.S. Local Government Tax-Supported Rating CriteriaALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESELIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OFUSE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHEDRATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OFCONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT
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