Fitch Rates Cheshire, Connecticut's 2009 GOs 'AA+'; Upgrades Outstanding GOs

The upgrade to 'AA+' from 'AA' reflects improvement in Cheshire's financial flexibility, complementing a long history of solid financial operations, as well as a moderation of the town's debt ratios, a trend that should continue given its limited capital needs. Adding to credit strengths are the town's strong economic indicators that continue to perform well in the current recessionary environment. High tax collection rates, well funded pension systems, and a manageable OPEB liability are also credit factors. A key rating driver is the continued development of local employment opportunities, evidenced in part by the maintenance of sound economic indicators.

Located in New Haven County, Cheshire's good transportation links enhance its access to the cities of Hartford, New Haven, and Waterbury. Consequently, this residential suburb is home to many professionals working nearby. The town's own economic base consists largely of manufacturing and wholesale distribution companies in and around its industrial park, as well as a sizable state prison. Cheshire's five-year strategic plan, which was recently reviewed, looks to expand the town's commercial tax base while preserving its suburban characteristics. Most recently, Napoli Foods opened a 120,000 square foot distribution facility in the town. The April 2009 unemployment rate of 5.5% remained well below regional and national averages, as has been the historical norm. Income levels are above average, with per capita money income equal to 114% and 153% of the state and national averages, respectively.

Conservative budgeting practices and high current tax collection rates have contributed to the town's historically strong financial position. While fiscal 2009 is expected to end with an approximately $1.5 million decline in unreserved general fund balances, most of the draw was planned for transfers to reserve funds outside of the general fund. The expected operating deficit is minimal, and the town will still meet its fund balance policy requiring an undesignated general fund balance equal to at least 8%-9% of the prior year's spending. Unreserved general fund balances as a percentage of spending increased to a healthy 11.2% in fiscal 2008 from 9.8% the prior fiscal year.

The fiscal 2010 operating budget was balanced with a modest amount of reserves, as is the town's practice. The budget increased by just 0.2% to approximately $94 million, underscoring the town's ability to manage expenditures in a challenging revenue-raising environment. Officials have received a $3.5 million disbursement from the Connecticut Resource Recovery Authority (CRRA) that will be dedicated toward one-time expenditures in fiscal 2010, providing additional flexibility during the recessionary period. An additional $1.6 million disbursement from the CRRA is forthcoming.

Cheshire's debt ratios are moderately low and expected to decline, given the town's modest capital needs and debt issuance expectations, as well as its rapid amortization rates; overall net debt equals $2,137 per capita, or 1.5% of taxable market value. The debt service burden relative to general fund expenditures remains slightly above average, although mitigated by the completion of significant capital investments over the past decade. Officials expect to meet a town policy limiting debt service to 10% of spending by fiscal 2010. Pension systems are well funded, despite having sustained investment losses more recently; the town's two largest plans were overfunded as of their July 1, 2008 valuation dates. The town's OPEB liability totals a modest $26 million and an OPEB trust has been established with just under $1 million of assets.

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Fitch Ratings, New York
Ryan A. Greene, +1-212-908-0315
Alexandra Knight, +1-212-908-9181
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com