Summary:

Bethel, Connecticut; General Obligation

Primary Credit Analyst: Timothy W Little, New York (1) 212-438-7999; timothy.little@standardandpoors.com Secondary Contact: Apple Lo, Boston (1) 617-530-8316; apple.lo@standardandpoors.com

Table Of Contents
Rationale Outlook Related Criteria And Research

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Summary:

Bethel, Connecticut; General Obligation

Credit Profile
US$8.765 mil GO BANs dtd 05/14/2014 due 11/20/2014 Short Term Rating US$2.94 mil GO rfdg bnds ser 2014 B due 05/06/2034 Long Term Rating US$1.61 mil GO rfdg bnds ser 2014 A due 05/01/2034 Long Term Rating Bethel GO Long Term Rating AAA/Stable Upgraded AAA/Stable New AAA/Stable New SP-1+ New

Rationale
Standard & Poor's Ratings Services raised its rating on Bethel, Conn.'s existing general obligation (GO) debt to 'AAA' from 'AA+', based on its local GO criteria released Sept. 12, 2013. In addition, we assigned our 'AAA' rating to the town's 2014 series A and B GO bonds and our 'SP-1+' short-term rating to the town's bond anticipation notes (BANs). The outlook is stable. The short-term rating reflects our view that the town maintains a very strong capacity to pay principal and interest when the notes come due. Bethel has a low market risk profile because of its strong legal authority to issue long-term debt to take out the notes. In addition, it is a frequent issuer that regularly provides disclosure to market participants. The town's full faith and credit pledge secures the bonds. We understand that officials will use the series 2014A and B proceeds to refund a portion of the town's outstanding series 2004 and 2006 bonds. There is an expected present value savings of $450,000 related to the refunding. There is no extension of maturity and savings will be taken evenly over the life of the bonds. We understand that officials will use proceeds to refund its BANs outstanding and to fund various capital improvements. The rating reflects our assessment of the following factors for Bethel, specifically what we consider its: Very strong economy supported by a stable property tax base and participation in the broad and diverse Bridgeport-Stamford-Norwalk metropolitan statistical area (MSA); Very strong budgetary flexibility that has seen general fund balance growth the past three fiscal years; Strong budgetary performance with consistent operating results in the general fund and total governmental funds; Very strong liquidity, providing sufficient cash levels to cover both debt service and expenditures; Strong management conditions with good financial policies and practices; and Strong debt and contingent liability position, as the result of well-defined capital improvement plans (CIPs).

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Summary: Bethel, Connecticut; General Obligation

Very strong economy

Bethel encompasses 17 square miles in northern Fairfield County, bordered by Danbury and Newtown. The town is as an affluent bedroom community, complemented by a modest commercial and industrial presence. Participation in the Bridgeport-Stamford-Norwalk MSA provides additional economic stability. The town's wealth and incomes are what we consider extremely strong, with a market value per capita of $140,518 and projected per capita effective buying income at 143% of national levels. Fairfield County unemployment was 7.1% in for 2013.

Very strong budget flexibility

In our opinion, the town's budgetary flexibility is very strong with fiscal 2013's general fund available reserves a very strong 16% of expenditures, an increase from 11% of expenditures in 2012. The town has formally adopted a reserve policy to set the minimum fund balance at 10% of expenditures with additional policies for any potential use of reserves. It also sets guidelines of what excess fund balance may be used for (i.e., debt service, tax rate stabilization, and capital projects).

Strong budgetary performance

Bethel's budgetary performance has been strong, in our view, with consistent operating results in the general fund and total governmental funds. For fiscal 2013, the town realized a general fund operating surplus of roughly 2.5% of expenditures. The surplus is net of annually reoccurring transfers from its general fund into the capital and nonrecurring fund. Education, general government, and public safety are the leading spending categories, accounting for 65%, 18%, and 4%, respectively, of general fund expenditures. The town's primary general fund revenues are property taxes (79% of revenues), and intergovernmental aid (19% of revenues). Property tax collections are strong and stable with the town collections on average nearly 99% of its annual levy by the end of the fiscal year.

Very strong liquidity

Supporting Bethel's finances is what we consider very strong liquidity, with total government available cash at 21% of total governmental fund expenditures and at 433% of debt service. This includes $10.6 million in short-term investments with a maturity of less than one year. We believe Bethel has strong access to external liquidity. It has issued GO bonds and BANs frequently in the past 10 years.

Strong management
We view the town's management as strong, and consider it "good" under our Financial Management Assessment methodology, indicating financial practices exist in most areas, but that governance official might not formalize or regularly monitor all of them. Including the town's aforementioned reserve policy, the town also maintains an annually updated 10-year CIP that identifies specific projects and funding, and informal five-year financial projections.

Strong debt and contingent liability profile

In our opinion, the town's debt and contingent liability profile is very strong, with total governmental funds debt service a moderate 5% of total governmental funds expenditures and with net direct debt at 63% of total governmental funds revenue. Meanwhile, overall net debt is low, in our opinion, at 1.8% of market value. Amortization of debt is average with 58% of principal to be retired within 10 years. The town has plans for construction of a new police facility that will likely receive voter approval sometime next year; the estimated new money for this project is about $10

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Summary: Bethel, Connecticut; General Obligation

million. The town currently administers two defined-benefit plans: a town plan and a police plan. For each plan, the town has contributed, on average, over 100% of its annual required contribution (ARC) the past three fiscal years. As of the 2013 valuation, the town plan is 68% funded with a $9.3 million unfunded liability and the police plan is 71% funded with a $3 million unfunded liability on an actuarial basis. The town provides other postemployment benefits (OPEBs) for police, town, and board of education employees in the form of health care insurance; the plan is funded on a pay-as-you-go basis. Cumulatively, the town contributed $479,000 in 2013 or 34% of its ARC. The unfunded OPEB liability was about $14.4 million as of July 1, 2011. Combined, pension and OPEB costs were about 4% of total governmental expenditures in fiscal 2013.

Very strong institutional framework

We consider the Institutional Framework score for Connecticut municipalities as very strong.

Outlook
The stable outlook reflects our view of Bethel's strong budgetary performance and very strong flexibility, coupled with a very strong underlying economy. We do not expect to change the rating in our two-year outlook horizon due to our expectation that management will continue to adhere to its formal and sustainable policies and practices in managing its finances and any fluctuation in the local economy.

Related Criteria And Research

Related Criteria
USPF Criteria: Local Government GO Ratings Methodology And Assumptions, Sept. 12, 2013 USPF Criteria: Key General Obligation Ratio Credit Ranges Analysis Vs. Reality, April 2, 2008

Related Research
Institutional Framework Overview: Connecticut Local Governments

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

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