Fitch Rates Greenwich, CT GO Bonds 'AAA' and BANs 'F1+'; Outlook Stable

Fitch Ratings assigns the following ratings to the Town of Greenwich, CT's (the town) general obligation (GO) bonds and notes:

--$45,000,000 GO bonds, issue of 2014, at 'AAA';

--$85,000,000 bond anticipation notes (BANs) issue of 2014 at 'F1+'.

The bonds and BANs are being issued to permanently finance a portion of outstanding BANs and to finance capital improvements. The bonds and BANs are scheduled to sell competitively on January 16.

In addition, Fitch affirms the following ratings for the town:

--$89 million outstanding GO bonds at 'AAA';

--$55 million outstanding BANs, issue of 2013, at 'F1+'.

The Rating Outlook is Stable.

SECURITY

The bonds and notes are general obligations of the town and are secured by the town's full faith and credit and unlimited taxing power.

KEY RATING DRIVERS

SUPERIOR ECONOMIC PROFILE: Superior wealth levels and a breadth of regional employment opportunities underscore Greenwich's economy, below-average unemployment rate and exceptionally high market value per capita.

SOPHISTICATED FINANCIAL MANAGEMENT: The town's historical and current use of prudent and conservative management practices supports its strong financial profile.

STRONG BALANCE SHEET RESOURCES: A history of surplus operations has increased the town's general fund reserves to ample levels and, combined with ancillary funds, provide for a strong level of financial flexibility.

MANAGEABLE LONG-TERM LIABILITIES: Debt ratios remain moderate-to-low but are expected to increase slightly as a result of the town's switch to debt-financed capital projects in connection with its 15-year capital improvement plan. Other post-employment benefits (OPEB) and pension liabilities are prudently managed, although funded pension levels have declined.

EXPECTATIONS FOR STRONG MARKET ACCESS: The 'F1+' short-term rating reflects Fitch's expectation for strong market access given Greenwich's superior long-term credit fundamentals.

RATING SENSITIVITIES

SOUND FINANCES DRIVE THE STABLE OUTLOOK: The rating is sensitive to shifts in fundamental credit characteristics. The Stable Outlook reflects Fitch's expectation that these shifts are unlikely given the town's strong financial management.

CREDIT PROFILE

Greenwich is located in southwestern Connecticut approximately 28 miles from New York City and has a population of roughly 62,000 (2012).

ABOVE-AVERAGE DEMOGRAPHIC PROFILE

Greenwich's wealth levels are among the highest in the nation. Many of the town's residents are executives and professionals who have easy access to New York City, Greenwich and southern Fairfield county labor markets. Unemployment rates of 5.4% for October 2013, down from 5.6% a year prior, remain below the state (7.5%) and national (7.0%) averages.

The town's estimated market value of $42.3 billion, based on a 2012 grand list value of $30.8 billion, is up 0.5% from the prior year and is the largest of any Connecticut municipality. It is predominantly residential (80% of value), with a small commercial real estate presence representing office space and high-end retail. The average home price in Greenwich was $1.8 million in 2013, which while down 4% from the prior year is further evidence of the town's high wealth. Market value per capita is an impressive $707,327.

FINANCIAL MANAGEMENT IS STRONG

The town's financial strength is derived from its deep, stable resources as well as strong financial management and conservative budgeting. In fiscal 2008 the town moved from a modified pay-as-you-go method of financing capital projects through general fund borrowing to a more traditional capital borrowing practice. As a result, its negative unrestricted fund balance position reversed beginning in fiscal 2011.

In fiscal 2013, the town's general fund experienced an operating surplus of $7.7 million after transfers. This gain follows $5.7 million and $16.7 million net operating surpluses in fiscals 2012 and 2011, respectively. The unrestricted general fund balance has increased to $35.3 million as of fiscal 2013 year-end, or a sound 9.5% of spending. Contributing to the surplus results were positive expenditure variances due to conservative budget projections, and employee cost savings due to maintenance of vacated positions for both general town and school departments. On the revenue side, property tax revenues, building permits and other revenues were stronger than expected.

Greenwich also maintains a working fund balance in its risk reserve fund and capital non-recurring fund to help subsidize any unanticipated legal costs as well as pay-as-you-go capital costs. The balances in these funds combined are $4.6 million at fiscal 2013 year-end, equating to 1.2% of general fund spending, providing additional financial cushion.

The town's fiscal 2014 operating budget increased spending by 3.4%, compared to 2.7% in fiscal 2013. The primary drivers were continued increases in employee benefit costs, education, and debt service. The budget also includes a $3 million contribution to the capital non-recurring fund and $500,000 to its risk reserve fund, and $9.4 million in general fund spending for capital projects. Year-to-date operations are trending similar to last year, with revenue results better than budget. If this trend continues, management expects to record another surplus by fiscal year-end, leading to further growth in fund balance. Fitch finds this projection reasonable, based on historical results and management's close monitoring of expenditures.

LOW-TO-MODERATE DEBT LEVELS

The town's credit profile benefits from a history of pay-as-you-go capital financing which helped maintain a manageable debt burden. Town debt, net of sewer assessments used to support sewer-related GO debt, is moderate on a per capita basis ($2,974), but extremely low at 0.4% of the very large market value. Fitch expects that debt ratios will increase moderately as a result of the town's expected borrowing over the next couple of years to meet its capital improvement plans. Debt amortizes rapidly, with all general fund-supported debt retired in five years, as per town policy. All debt retires at an above-average 86% rate in 10 years.

MANAGEABLE LONG-TERM EMPLOYEE RETIREMENT COSTS

The town's single-employer pension plan had historically been fully funded, but funding levels have declined as a result of significant market losses in 2008 and 2009 and management's decision to gradually reduce the expected investment rate of return from 8.5% to an ultimate level of 7% for the July 1, 2014 valuation. The unfunded liability totaled $132 million at July 1, 2012, equivalent to an estimated 67% funding level based on Fitch's conservative 7% rate of return.

The town's approach to managing its pension, including closing of the pension to all newly hired non-safety employees and a history of paying 100% of its annual required contribution (ARC) as required by the town charter, should improve funding levels over time. The town's pension ARC totaled $16.4 million in fiscal 2013, up from $14.5 million in fiscal 2012, and a modest 4.4% of general fund spending. The pension ARC for fiscal 2014 increased to $19.8 million (+21%) and is projected to increase to $22.7 million (+14.6%) in fiscal 2015, driven primarily by the reduction to 7.25% from 7.50% in the actuarial expected investment rate of return.

The town's credit profile further benefits from forward-funding of its OPEB liability for the past 10 years and the establishment of an irrevocable trust in 2008. The trust had assets of $16.6 million and was 24% funded as of July 1, 2012.

The town's carrying costs for its pension ARC, OPEB pay-go and annual debt service was a manageable 9.6% of total governmental spending in fiscal 2013.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com, and the National Association of Realtors.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=814138

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