Fitch Rates Hamden, CT'S GOs 'BBB+'; Outlook Remains Negative
1. Fitch Rates Hamden, CT'S GOs 'BBB+'; Outlook Remains
Negative
NEW YORK--(BUSINESS WIRE)--Fitch Ratings features assigned your subsequent ratings in order to
issuances by the city involving Hamden, Connecticut:
--$26.4 million general obligation (GO) bonds, 2014 series A New rated 'BBB+';
--$17.96 million GO bond anticipation notes (BANs) 2014 rated 'F2'.
The bonds as well as notes are expected to be sold by means of negotiation upon August 12.
The bond proceeds will fund notes maturing about August 21 that possess been issued to finance
different public improvements. The Particular BANs will be accustomed to fund town and institution
richesse improvements.
In addition, Fitch affirms the next ratings:
--$119 million GO bonds from 'BBB+'.
The Ranking Outlook for your bonds can be Negative.
SECURITY
The bonds along with BANs are generally general obligations with the city backed by its total faith,
credit, and limitless taxing power.
KEY RATING DRIVERS
SLOW PENSION FUNDING PROGRESS: Your Negative Outlook relies on the poor funding of the
town's pension plan as well as the dependence on substantial tax rate increases or benefit reform in
order to avert plan insolvency.
SLIM FINANCIAL RESERVES: the Negative Outlook furthermore reflects Fitch's concern that
satisfactorily addressing the particular severely underfunded pension is going to be particularly
challenging due for you to the town's other economic pressures, including marginal reserves.
TAX INCREASES HELPING OPERATIONS: Management forecasts positive, albeit modest, operating
brings about fiscal 2014. The fiscal 2015 tax improve primarily provides for increased pension
contributions. Perhaps with the increase, your pension payment is well short with the actuarially-
based contribution.
STRONG DEMOGRAPHIC PROFILE: Prosperity levels tend to be favorable and the poverty rates are
low. Your area economy rewards through a strong education and learning as well as healthcare
sector, and an unemployment charge which usually approximates the actual national rate.
DEBT EXPECTED TO RISE: the planned issuance associated with pension obligation bonds (POBs)
2. will practically double the particular town's outstanding financial debt while just partially addressing
the particular unfunded liability. overall debt metrics would even now not really be high. However,
substantial raises within carrying costs are anticipated over the subsequent five years.
ADEQUATE MARKET ACCESS: the 'F2' short-term rating reflects the typical credit rating
characteristics in the town along with Fitch's expectation pertaining to adequate industry access.
RATING SENSITIVITIES
PENSION FUNDING PROGRESS: Inability to adhere to together with through in promises to carry
on to handle the particular significant unfunded pension liability, which includes issuance involving
POBs along with sufficient increases within tax rates, will likely bring about extra score action.
WEAKENED FUND BALANCE: Further erosion regarding currently weak reserve ranges could
location downward strain around the rating.
CREDIT PROFILE
Hamden is really a mid-sized town, with a population of 60,868, situated concerning 10 miles north
regarding New Haven.
VERY HIGH PENSION AND OPEB LIABILITIES
The funded status in the town's (closed) pension plan has been extremely poor pertaining to some
time. Your July 1, 2012 funded ratio was 14% and the unfunded actuarial accrued liability (UAAL)
was $360.4 million. Draft actuarial recent results for July 1, 2014 indicate the UAAL is $399 million,
or even a substantial 6.9% associated with industry value of real property, and the funded ratio is
actually 10%.
The town also has a large unfunded some other post-employment benefit (OPEB) liability regarding
$440 million (as involving July 1, 2012) or perhaps 8% regarding industry value. Hamden funds its
OPEB on a pay-as-you-go basis, contributing $16.7 million with the $33.9 million expense within
fiscal 2013.
Together with credit card debt services costs associated with $16.3 million in fiscal 2013, the actual
servicing regarding long-term liabilities, that assumes full funding in the pension actuarially
necessary contribution (ARC) but the pay-go quantity regarding OPEB, would consume near 27%
regarding governmental fund spending, that Fitch considers high. the actual pension payment fell
brief simply by $17.8 million.
STEPS TO PENSION SOLVENCY ONGOING
The town's pension plan is estimated to become insolvent in concerning 2018 absent action. the city
is currently preparing necessary documents regarding submission towards the state for report on its
financing plans regarding $125 million throughout POBs. the bonds would decrease the UAAL by
approximately 33%. the state features as significantly as two months in order to conduct its review
along with POB issuance is anticipated just before the finish with the calendar year. at present, your
town charter restricts POB credit card debt service for you to 4% of the spending budget as well as
the POB sizing is expected to fully utilize issuance capacity. The Actual fiscal 2015 spending budget
includes $3.4 million for that first curiosity payment around the POBs. Just Lately passed special
state legislation permits the actual town in order to step approximately total ARC funding more than
3. five-years as opposed for the statutory element complete ARC funding upon POB issuance.
The funding with the city pension plan fell to be able to a minimal $3 million throughout fiscal 2012,
simply 15.3% with the ARC. Since then, the actual city has increased your payment every year and
the fiscal 2015 budget appropriates any $13.75 million payment, a big boost in funding but
nevertheless far short with the $29 million ARC.
Upon POB issuance, statutes require the town for you to annually submit specific documents
towards the state, which includes an actuarial valuation with the pension plan. previously the
particular city had actuarial valuations done biannually; a yearly valuation will enhance the capacity
to monitor the plan's funding status, specifically as contribution along with advantage provisions
adjust. Starting in 2013 the city shifted via an automatic 3% COLA for you to a consumer price-
based COLA involving 1.59% out of the box permitted beneath the plan.
A January 2013 consultant statement identified personal savings through lowering the close to
future defined benefit accruals to 1.5% of final average salary. Below the actual pension plans your
multiplier for the computation involving rewards ranges through 2% in order to 3%, depending on
the many many years of support and the class involving employee. the city features not necessarily
formally initiated pension reform discussions together with labor as well as such discussions may
well not occur until 2015 pertaining to guardian (police and also fire) employees and 2016 for
support employees, based around the stated expirations in the final amendments towards the
pension plan.
FINANCIAL PROFILE IMPROVING BUT STILL WEAK
Maintenance of financial wellness while the pension ARC ramps up is key to credit rating health. The
Particular city enacted tax price raises inside everyone of the past five years, using a total five-year
charge increase associated with 35.8%. According to 2012 levy for each capita data compiled by the
state, the actual town was in the lower 1 / two of municipalities in the state, affording several space
with regard to tax increases. Tax raises to be able to date have got improved general fund structural
balance, yet complete pension ARC funding is definately not achieved along with economic
operations remain weak.
Significant operating deficits within fiscal many years 2010 along with 2011 drew down the town's
balances. Throughout fiscal 2012 monetary margins improved due to a tax charge increase,
expenditure reductions, along with heightened pension underfunding. in 2012 just 13.7% in the ARC
was funded. Your town closed fiscal 2013 with a $494 thousand general fund operating surplus
(0.2% regarding spending) along together with a really slim unrestricted stability of $1.7 million
(.8% involving spending). Management will be forecasting an approximate $500 thousand general
fund surplus inside fiscal 2014, enabled partly through savings from healthcare coverage reforms.
BALANCED FISCAL 2015 BUDGET
The town's fiscal 2015 finances are balanced and also includes a 2.5% property tax rate improve
which generates one more $4.5 million more than the previous budget. Appropriations pertaining to
pension-related expenses improve by simply $5.4 million. Spending Budget for you to budget, total
appropriations elevated by simply 3.3%. Labor contracts tend to be in position (except pertaining to
police and fire) via June 2017, using raises regarding 2% with regard to each of the final three years.
DEBT LEVELS EXPECTED TO REMAIN MIDRANGE WITH POBS
4. With the actual present providing total credit card debt will be $158.5 million, representing a new
moderate $2,573 for each capita or perhaps 2.7% of industry value. Your planned $125 million
pension obligation bonds issuance represents an amazing rise in debt; however, credit card debt
amounts will nevertheless be just around the higher finish involving midrange. overall long-term
obligations (debt, pension, OPEB) tend to be high.
The town's six-year capital improvement program identifies $62 million in money needs, with nearly
a new third in the tasks related to be able to public works. town charter limits capital-related debt
support to 10% involving spending budget and the town will be well beneath your policy.
EDUCATION & HEALTHCARE ANCHOR ECONOMY
Several universities tend to be situated inside the town, resulting inside a sizeable and also secure
education sector presence. Nearly All notably, Quinnipiac University Or College (851 employees) lies
within the town's borders, and also Yale University Or College (13,084 employees) is at adjacent
New Haven. the city furthermore benefits from the existence of several healthcare providers, for
example Ardenhouse Treatment along with Rehabilitation Center, a high employer using 370
employees.
The town's Could 2014 unemployment charge regarding 6.9% compares favorably for the New
Haven metropolitan statistical location (7.7%), along with approximates the state (6.9%) and also
national (6.1%) rates. The Actual town's labor force can be exceptionally skilled, together with
almost 42% with the adult-aged population holding the bachelor's diploma as well as higher (or
about 150% in the national norm). Prosperity levels for that town are at least 20% higher than those
involving the nation and in addition the poverty charge can end up being a reduced 7.8%
STABLE TAX BASE, POSITIVE ECONOMIC ACTIVITY
The estimated complete price of your taxbase is
really a sizable $5.8 billion, or perhaps a
favorable $94,000 per capita. The Particular
town's tax base exhibited resilience during the
current housing correction. Following falling
the reasonable 6.6% in fiscal 2011 thanks for
the 2010 revaluation, the particular tax base
stabilized. several commercial tasks tend to be
underway in the city which usually must bolster
prospects with regard to tax base growth.
Additional details can always be obtained with 'www.fitchratings.com'.
In inclusion for the sources of information identified throughout Fitch's Tax-Supported Score
Criteria, this
action had been additionally informed simply by details via Creditscope, University Or College
financial Associates,
S&P/Case-Shiller Residence price Index, IHS Global Insight, National Association involving Realtors.
5. Applicable Criteria and also Associated Research:
--'Tax-Supported rating Criteria' (Aug. 14, 2012);
--'U.S. Neighborhood Government Tax-Supported Score Criteria' (Aug. 14, 2012).
--'Rating U.S. Public Finance Short-term Debt' (Dec. 9, 2013).
Applicable Criteria and also Associated Research:
Rating U.S. Public Finance Short-Term Debt
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724680
Tax-Supported rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
U.S. local Government Tax-Supported Ranking 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=842477
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE '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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE
FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN
BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
http://www.businesswire.com/news/home/20140729006590/en/Fitch-Rates-Hamden-CTS-GOs-BBB-O
utlook
