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Summary:

Seymour, Connecticut; General


Obligation
Primary Credit Analyst:
Christian Richards, Boston (1) 617-530-8325; christian.richards@spglobal.com

Secondary Contact:
Victor M Medeiros, Boston (1) 617-530-8305; victor.medeiros@spglobal.com

Table Of Contents

Rationale

Outlook

Related Research

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Summary:
Seymour, Connecticut; General Obligation
Credit Profile
US$8.92 mil GO rfdg bnds ser 2017B due 03/01/2042
Long Term Rating AA+/Stable New
US$1.78 mil GO rfdg bnds ser 2017C due 03/01/2030
Long Term Rating AA+/Stable New
Seymour GO
Long Term Rating AA+/Stable Affirmed

Rationale
S&P Global Ratings assigned its 'AA+' long-term rating to Seymour, Conn.'s 2017B and 2017C series general obligation
(GO) refunding bonds. Additionally, we affirmed our 'AA+' long-term rating on the town's outstanding GO debt. The
outlook is stable.

The town's full-faith-and-credit pledge secures the bonds. The bonds are being issued in accordance with new state
statute on GO bonds. In July 2017, Connecticut Governor Malloy signed into law legislation permitting Connecticut
municipalities to issue GO debt with a maturity schedule of up to 30 years, an increase from the previous 20-year limit.
This change also applies to refunding bonds. The bond proceeds from this issuance will be used to refund existing GO
debt.

The long-term rating reflects our opinion of the following factors for the town, including its:

Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);
Strong management, with "good" financial policies and practices under our Financial Management Assessment
(FMA) methodology;
Strong budgetary performance, with a slight operating surplus in the general fund and an operating surplus at the
total governmental fund level in fiscal 2016;
Strong budgetary flexibility, with an available fund balance in fiscal 2016 of 10.8% of operating expenditures;
Very strong liquidity, with total government available cash at 10.4% of total governmental fund expenditures and
123.7% of governmental debt service, and access to external liquidity we consider strong;
Adequate debt and contingent liability position, with debt service carrying charges at 8.4% of expenditures and net
direct debt that is 61.1% of total governmental fund revenue, as well as low overall net debt at less than 3% of
market value; and
Strong institutional framework score.

Very strong economy


We consider Seymour's economy very strong. The town, with an estimated population of 16,803, is in New Haven
County in the New Haven-Milford MSA, which we consider to be broad and diverse. It has a projected per capita
effective buying income of 124% of the national level and per capita market value of $102,031. Overall, market value

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Summary: Seymour, Connecticut; General Obligation

was stable over the past year at $1.7 billion in 2018. The county unemployment rate was 5.5% in 2016.

Residents benefit from access to the greater New Haven MSA via U.S. Route 8. The town is primarily residential with a
small commercial-industrial base. Residential properties make up about 75% of the tax base, followed by commercial
and industrial at about 9%. Leading employers include the town itself, Thule of Sweden, Shady Knoll Health Center,
and Basement Systems Inc.

The town's economy remains stable. Several of its leading employers and businesses continue to expand. Basement
Systems, whose international headquarters is in Seymour, upgraded its facilities and expanded operations within the
past five years. It is also in the process of constructing a supplemental facility. Thule of Sweden also made a $1.6
million investment into upgrading its facilities. There are also other companies in the town's Silvermine Technology
and Commerce Park that have set up operations there and have expanded from their original footprint, which has all
led to an overall increase in building permits over the last three years. The town has also focused on revitalizing its
downtown area through its Downtown Action Plan, which has resulted in the opening of several new shops over the
past 18 months. In addition, Seymour continues to invest in various sustainability and quality-of-life initiatives such as
the continued development of its Greenway Trail and Paul Pawlak Sr. Bypass Channel and Park, which officials believe
will make the town more attractive for new and current residents. Therefore, we expect the local economy to remain
very strong.

Strong management
We view the town's management as strong, with "good" financial policies and practices under our FMA methodology,
indicating financial practices exist in most areas, but that governance officials might not formalize or monitor all of
them on a regular basis.

Management submits monthly budget-to-actual reports to the board of finance, and it has a five-year capital
improvement plan with identified funding sources. The town also maintains a 10-year strategic plan with financial
goals. We understand the plan's reserve policy has a target of 8% of expenditures, but the goal is to boost reserves
eventually to 12%. Once reserves reach 10%, we understand a decrease in the balance below 9% will require a plan to
replenish reserves within three fiscal years. The plan also has a goal of reducing and maintaining debt expenditures as
part of the budget to no more than 6% of expenditures, to which the town does not currently adhere.

Strong budgetary performance


Seymour's budgetary performance is strong, in our opinion. The town had slight surplus operating results in the
general fund of 1.4% of expenditures, and surplus results across all governmental funds of 1.6% in fiscal 2016. General
fund operating results of the town have been stable over the last three years, with results of 0.1% in 2015 and negative
0.5% in 2014.

Fiscal 2016 results include adjustments for recurring transfers and one-time capital expenditures paid for with bond
proceeds. According to management, the fiscal 2016 surplus was mainly due to revenues exceeding the budget.
Property taxes came in higher than budgeted due to more aggressive collections, including a number of tax sales.
Building permit fees and state grant increases also contributed to the overall increase in revenues. In addition, the
town saw more than $155,000 in lower-than-budgeted expenditures due to various departmental turn-backs and
savings.

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Summary: Seymour, Connecticut; General Obligation

For fiscal 2017, the town estimates it will end with a general fund surplus of $753,000. Management attributes this to
its conservative budgeting practices, which led to expenditure savings across various departments and
higher-than-anticipated tax revenues.

The fiscal 2018 budget totals $56.2 million, which represents a 1% increase over the prior year and includes a $90,000
fund balance appropriation, as well as a $400,000 appropriation to the mill rate stabilization fund, which the town had
envisioned as a set-aside if state aid were to come in lower than budgeted. The town anticipates using the $400,000
mill rate stabilization fund set-aside in conjunction with $600,000 in savings from this refunding issuance,
approximately $600,000 in board of education turnbacks, and additional budgetary savings from retirements and other
items, to offset the loss of $1.849 million in state aid.

The town is issuing both the 2017B and 2017C series bonds in accordance with the state statute, signed into law in
July 2017. Under this law, Connecticut municipalities now have the statutory ability to restructure debt by refunding
existing GO debt with an elongated maturity schedule. While we could envision municipalities using this tool to mask
structural imbalances, we believe that Seymour is refunding debt to generate budgetary flexibility, given the ongoing
uncertainty with the state's budget. We believe that management weighed the increase in total debt from the refunding
against future debt plans and flexibility in its own budget and the potential for reduced intergovernmental aid or new
state mandates. We do not consider this refunding a credit positive or negative, per se, given management's proactive
approach to budgeting in an uncertain operating environment and what we view as its current budgetary balance and
expectation that it would continue without this refunding. In addition to providing budgetary flexibility, the town is
planning to dedicate the annual budgetary savings to funding the OPEB trust, which we view as a credit positive.

Property taxes make up about 72% of general fund revenues, followed by intergovernmental revenue at 25%. Tax
collections remain strong, averaging 98% over the past three years.

Strong budgetary flexibility


Seymour's budgetary flexibility is strong, in our view, with an available fund balance in fiscal 2016 of 10.8% of
operating expenditures, or $6.4 million.

The town expects available reserves to improve to $7.1 million or about 12.8% of budgeted expenditures, in fiscal 2017
due to its positive financial performance and anticipated year-end surplus of approximately $753,000. Seymour also
adheres to its reserve policy of maintaining available reserves at a minimum 8%. We therefore expect it to maintain its
strong budgetary flexibility, even with the inclusion of a $90,000 fund balance appropriation in the fiscal 2018 budget
and the additional flexibility required to absorb reductions in state aid.

Very strong liquidity


In our opinion, Seymour's liquidity is very strong, with total government available cash at 10.4% of total governmental
fund expenditures and 123.7% of governmental debt service in 2016. In our view, the town has strong access to
external liquidity if necessary.

We believe Seymour's frequent debt issuances, including GO bonds, support its strong access to external liquidity. In
addition, the town does not currently have any contingent liquidity risks from financial instruments with payment
provisions that change on the occurrence of certain events. We expect Seymour's liquidity profile to remain very

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Summary: Seymour, Connecticut; General Obligation

strong because there is no expectation of any significant deterioration of cash balances.

Adequate debt and contingent liability profile


In our view, Seymour's debt and contingent liability profile is adequate. Total governmental fund debt service is 8.4%
of total governmental fund expenditures, and net direct debt is 61.1% of total governmental fund revenue. Overall net
debt is low at 2.4% of market value, which is, in our view, a positive credit factor.

Officials do not plan to issue any additional debt within the next two-to-three years. We note that our view of
Seymour's debt profile fell to adequate from very strong, given the slight increase in debt related to issuance costs and
the elongated amortization period, which reduces below 65% the amount of principal amortizing within ten years.

Seymour's combined required pension and actual other postemployment benefit (OPEB) contributions totaled 4.1% of
total governmental fund expenditures in 2017. Of that amount, 2.0% represented required contributions to pension
obligations, and 2.1% represented OPEB payments. The town made its full annual required pension contribution in
2017.

Seymour participates in the Connecticut Municipal Employees' Retirement System for pensions. The town's
proportionate share of the net pension liability totaled $2 million as of fiscal 2016. The system was 93% funded.

The town also provides OPEBs to retirees. As of July 1, 2015, the most recent actuarial valuation, the OPEB plan had
an unfunded actuarial accrued liability of $36.9 million, which represents a $2.5 million decrease since 2013. In the
past, Seymour offered only high-deductible plans for full-time police employees, which has netted it savings on its
annual contributions and decreases in its liability. The town is also encouraging other unions to adopt this plan as well.
It also recently approved the creation of an OPEB trust, which it currently plans to begin funding with an initial
$80,000 contribution in fiscal 2018, and then apply at least 25% of its annual surplus toward the trust in future years.

Strong institutional framework


The institutional framework score for Connecticut municipalities is strong.

Outlook
The stable outlook reflects S&P Global Ratings' opinion of Seymour's strong budgetary performance and flexibility and
very strong economy. While we expect that state finances may continue to pressure local governments in the state, we
expect that Seymour's management will remain proactive and make the necessary budgetary adjustments to maintain
stable financial operations. Therefore, we do not expect to change the rating within the two-year outlook horizon.

Upside scenario
Over time, a higher rating could be considered if economic indicators improve to be comparable to those of higher
rated peers, along with stronger budgetary flexibility through positive financial operations, along with an improvement
in the debt profile.

Downside scenario
Although unlikely, if the town's budgetary performance deteriorates, leading to significant drawdowns in reserves, we
could lower the rating.

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Summary: Seymour, Connecticut; General Obligation

Related Research
S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency, Sept. 12, 2013
Incorporating GASB 67 And 68: Evaluating Pension/OPEB Obligations Under Standard & Poor's U.S. Local
Government GO Criteria, Sept. 2, 2015

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors,
have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria.
Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is
available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found
on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the
left column.

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