Fitch Rates Bethel, Connecticut's 2009 GOs 'AA' & GO BANs 'F1+'; Outlook Stable

--$22.8 million GO bonds, issue of 2009, series A;

--$15.5 million GO sewer bonds, issue of 2009, series B.

Fitch also assigns an 'F1+' rating to the town's GO bond anticipation notes (BANs). The GO bonds and BANs are scheduled to sell competitively on Nov. 17, 2009 with bond proceeds financing renovations and additions to the town's high school and a sewer expansion project. GO BANs will finance various school, sewer, and general purpose capital projects. In addition, Fitch affirms the 'AA' rating on the town's approximately $22.5 million of outstanding GO bonds. The Rating Outlook is Stable.

The 'AA' rating reflects Bethel's stable financial operations, strong economic indicators, and moderate debt ratios, which should benefit from minimal capital needs. The town's small, but relatively diverse employment base exhibits below-average unemployment rates and high wealth levels. Tax base growth between revaluation years has been healthy for much of this decade. A key rating driver is the maintenance of adequate financial flexibility in a challenging revenue-raising environment, coupled with improvement in the town's pension funded ratios. The 'F1+' rating on the GO BANs reflects Bethel's strong general credit characteristics.

Located in northern Fairfield County, Bethel is a community of an estimated 18,438 with commuter access to the employment centers in Danbury and lower Fairfield County. The town's own employment base is largely stable and includes a mix of jobs in precision manufacturing, research, and services. The largest employers include Gillette-Duracell, Eaton Corporation (aerospace research), and Bethel Healthcare. The addition of a Target and Big Y to the town's major employers offset a modest downsizing at Eaton Corporation more recently. Unemployment rates have risen with the broader economic recession, but remained below-average at 7.4% in August 2009. Per capita income levels are comfortably above the national average and on par with the state's high average.

Bethel's financial operations have exhibited stability across economic cycles. Budgets are developed conservatively, with prudent revenue forecasts typically leading to balanced operations and healthy reserve levels. Fiscal 2009 is expected to end with a modest surplus - the town's eighth this decade - which should bring the unreserved general fund balance to approximately 10% of spending ($6 million), in line with Bethel's informal fund balance policy. The fiscal 2010 budget increased by a negligible 0.15% over the fiscal 2009 budget and, as is the town's practice, does not include an appropriation of fund balance. Officials expect to formalize the town's fund balance policy within the current fiscal year.

With the series 2009 issues, Bethel fulfills its bonding needs for the foreseeable future. As such, currently moderate debt ratios of $2,244 per capita, or 1.3% of taxable market value, are expected to fall. Amortization rates are average and debt service claims a modest 5.8% of fiscal 2009 spending. The town does not maintain a five-year capital improvement plan, as its major capital needs have largely been met. Bethel's town and police pension plans are underfunded at 55.2% and 64.5%, respectively, as a result of valuation and benefit changes, coupled with poor investment returns, earlier in the decade. The town has prudently increased funding of the annual required contributions (ARCs) for several years and plans to overfund the ARCs in fiscal years 2010 and 2011. Officials expect a modest increase in funded ratios as of the July 1, 2009 valuation date. Bethel does not expect a large other post-employment benefits liability when its actuarial valuation is finalized for inclusion in the fiscal 2009 comprehensive annual financial report.

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