NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the following Wilson, NC (the city) ratings:
--$12.3 million general obligation (GOs) refunding bonds, series 2009 at 'AA'.
The Rating Outlook is Stable.
SECURITY
The bonds are general obligations of the city for the payment of which the city's full faith and credit and unlimited taxing power are irrevocably pledged.
KEY RATING DRIVERS
AMPLE RESERVES AND LIQUIDITY: Strong financial management has produced healthy reserves well-above the conservative policy level and high liquidity levels. Fitch views the city's limited expense cuts to date as a credit positive in that flexibility for future cuts remains.
MANUFACTURING BASED ECONOMY WITH SOME DIVERSIFICATION: A fairly diverse manufacturing base anchors the stable but limited economy.
WEAK SOCIOECONOMIC INDICATORS: Unemployment exceeds national and state levels and wealth levels are below the state and national levels.
MODERATE DEBT POSITION: Limited intermediate-term debt issuance will allow the city to maintain the current manageable debt position. Long-term obligations do not pressure the credit.
RATING SENSITIVITY
STRONG FINANCIAL MANAGEMENT: The rating is sensitive to shifts in the city's strong financial management practices. Financial flexibility and low debt levels are the key credit strengths offsetting the more limited economy.
CREDIT PROFILE
Wilson is located along Interstate 95 roughly 50 miles east of Raleigh. The city, with a 2011 population of 49,297, continues to experience sound growth, with the population rising 11% since 2000.
LIMITED ECONOMY; DIVERSIFIED MANUFACTURING
Manufacturing makes up a significant portion of the local economic activity. Positively there is a diverse mix of companies within the sector, including higher-end manufacturing. Becton, Dickinson & Company, a medical device manufacturer, has completed its $128 million facility at the Wilson Corporate Park.
More traditional manufacturers are also key to the economy, including Bridgestone Americas, Inc., one of the city's top employers. Bridgestone is currently in the process of a $350 million renovation to its plant, which is expected to be completed by 2016. The largest employer, Branch Banking and Trust Corporation, along with some retail and medical concerns rounds out the economy.
Socio-economic indicators trail those of the nation. The city unemployment rate has historically been between two and four points above the national average reflecting the manufacturing based economy. The city attributes sizeable month to month variation (12.7% for January 2013 v. 11.5% for December 2012) to seasonality within the tobacco industry, which Fitch views as reasonable. Annual employment growth over the last decade has been mixed with the city outperforming the national average pre-recession and underperforming during and post-recession. Wealth levels are around 69% - 80% of national levels and the poverty rate is 1.7x the national average.
STRONG RESERVES AND FINANCIAL FLEXIBILITY
Wilson's overall reserve levels are ample. Sound management has helped ensure high liquidity. The city ended fiscal 2012 with an unrestricted general fund balance (the sum of committed, assigned, and unassigned per GASB 54) totaling $12.6 million or 28.9% of spending, above the city's reserve policy level of 25%. When the reserve required by state statute is added, the balance increases to $16.2 million or 37.1% of expenditures; the state requires a reserve for receivables, and Fitch regards these balances available for operations if needed.
The fiscal 2013 budget is balanced with a $1.7 million appropriation of fund balance, although the city expects to use less than the full appropriated reserve. Fitch notes that this would conform to a consistent pattern of not using the full fund balance appropriated in the budget. Preliminary fiscal 2013 results indicate a slight decline in permitting revenue, offsetting positive sales tax collections. Expenditures increases were driven by the city's first merit-based pay increase in several years.
The fiscal 2014 budget is still in the initial planning stages, with the city anticipating the possibility of mild revenue and expenditure growth. Fitch considers this assumption consistent with the city's conservative budgeting practices.
ENTERPRISE SYSTEMS DO NOT PRESSURE GENERAL FUNDS
The city's broadband fund, which in the past relied upon a long-term loan from the gas fund, has generated sufficient revenues to pay its debt service over the past two years. Fitch will monitor for potential general fund pressures, given that the enterprise system provides a non-core service vulnerable to competition.
Operations have historically been bolstered by transfers from the city's electric and gas utilities (revenue bonds rated 'AA' Stable Outlook by Fitch). Transfers from the utility funds have consistently accounted for approximately 8 - 9% of general fund revenue. The city is well within its formal policy to limit electric fund transfers to 5% of the gross fixed assets, and there is a similar, informal policy regarding transfers from the gas fund. Fitch notes that these transfers are repayment for general fund services, mitigating concerns about the necessity of outside support for the general fund.
DEBT POSITION IS CREDIT POSITIVE
Overall debt levels are low at $1,129 per capita and 1.4% of market value. Amortization is extremely rapid at 99.5% of principal retired within 10 years. There is no exposure to variable rate debt.
The fiscal 2012 - 16 capital improvement plan totals $94.4 million. The city has included $74.2 million in new bond issuance but will factor debt affordability into their final decision regarding issuance.
MODERATE LONG-TERM OBLIGATIONS
The city's carrying costs for debt service, pension requirements and OPEB pay-go is moderate at 16.1% of fiscal 2012 governmental (less capital) fund spending. The majority of city employees participate in the state's well-funded Local Governmental Employees' Retirement System (LGERS), a cost-sharing multiple-employer plan. The city administers a single-employer pension plan to provide supplemental benefits to qualified law enforcement officers up to age 62. The unfunded OPEB liability equals a somewhat high 1.2% of market value. Fitch believes that the post-employment obligations do not pressure the credit due to the city's modest debt profile.
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, 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=788809
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.