NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'F1+' rating to the city of Norwich, CT's (the city) approximately $8,045,000 of 2008 general obligation (GO) bond anticipation notes (BANs). The BANs, expected to sell competitively on Dec. 4, 2008, will fund various capital projects in the city. Fitch has also affirmed the rating on Norwich's approximately $27.5 million of outstanding GO bonds at 'AA-'. The Rating Outlook on the GO bonds is Stable.The 'AA-' GO rating reflects the city's sound financial performance resulting from conservative budgeting practices and steady financial support provided by its full-service utility system. The city's stable economy exhibits good prospects for growth, but wealth indicators remain below-average. A favorable debt profile and manageable capital needs are also rating factors. A key rating driver is the city's continued efforts to expand its tax base, which should enhance its revenue-raising flexibility. The 'F1+' rating reflects the city's general credit characteristics.
Located at the head of the Thames River in southeastern Connecticut, Norwich's local employment base is diverse for a community of its size. A sizable share of economic activity is centered at the 400-acre Norwich Industrial Park (the park), which is home to nearly 50 companies and 2,200 employees. Electric Boat, a division of General Dynamics (senior unsecured notes rated 'A' by Fitch; Stable Outlook), recently leased space in the park to support its Virginia-class submarine program. Officials expect a roughly 20%-30% increase in the tax base stemming from the Oct. 1, 2008 revaluation (effective fiscal 2010), and several sizeable development projects in the planning stages could add to the city's tax base in the coming years. However, current economic conditions could complicate these plans. Per capita money income levels were a low 72.1% of the state's high average in 2000 (the latest year available) but only slightly under the national level. The September 2008 unemployment rate (6.8%) remains above the state (5.9%) and nation (6%), as it has historically. Tax base growth between revaluation years has been quite modest.
The city's financial performance benefits from conservative budgeting practices including forecasting current property tax collections on a three-year rolling average and the maintenance of an unreserved general fund balance equal to 8% of expenditures; the city typically budgets fund balances over 10% of expenditures for tax relief purposes. Fiscal 2008 is expected to end with an approximately $950,000 deficit; however, the unreserved general fund balance should still equal a healthy 10.3% of spending. The adopted fiscal 2009 general fund budget grew by a manageable 3.1% over the prior year's budget, despite the city's rising fixed cost burden. Officials believe that its ongoing hiring freeze should offset weak revenues from interest income, conveyance taxes, and building permits in the current fiscal year. Per city charter, the Norwich Public Utilities Department (a full service utility system) makes an annual payment to the general fund equal to 10% of prior year gross revenues, which equates to about 6% of the budget.
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