S&P Report

Summary:

Bethel, Connecticut; GeneralObligation

Primary Credit Analyst:

Timothy W Little, New York (1) 212-438-7999; [email protected]

Secondary Contact:

Apple Lo, Boston (1) 617-530-8316; [email protected]

Table Of Contents

Rationale

Outlook

Related Criteria And Research

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 28, 2014 1

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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 SP-1+ New

US$2.94 mil GO rfdg bnds ser 2014 B due 05/06/2034

Long Term Rating AAA/Stable New

US$1.61 mil GO rfdg bnds ser 2014 A due 05/01/2034

Long Term Rating AAA/Stable New

Bethel GO

Long Term Rating AAA/Stable Upgraded

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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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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Summary: Bethel, Connecticut; General Obligation

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