Fitch Rates Wilmington, Delaware's $74.2MM GOs 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch assigns an 'AA-' rating to Wilmington, Delaware's (the city) $74.2 million general obligation (GO) bonds, series of 2008A. The bonds are scheduled to sell via negotiation on June 16, with proceeds refunding certain GO bonds of the city and financing various capital improvement projects. In addition, Fitch affirms the 'AA-' rating on the city's approximately $190 million of outstanding GO bonds. The Rating Outlook is Stable.

The 'AA-' rating reflects the city's strong fund balance levels, moderate debt burden with manageable capital needs, and substantial economic base, although concentrated in financial and business services. The rating also incorporates the city's below-average wealth levels and economic indicators. Ongoing economic development has increased Wilmington's tax base and diversified its revenue stream. Fitch expects development to continue at a measured pace, allowing management to address infrastructure requirements in a timely manner without undue fiscal strain.

With an estimated 2006 population of 72,826, relatively unchanged from the 1990 census, Wilmington is the largest city in the state. Access to major transportation networks as well as undeveloped waterfront tracts have spurred residential and commercial development in the Riverfront and downtown areas, although the city's urban renewal efforts also target other neighborhoods in need of redevelopment. Several recent projects have mitigated the revenue declines that resulted from Bank of America's acquisition of MBNA, and Fitch expects the city to continue to benefit from its growing economic base, in spite of an economic softening. Nevertheless, unemployment has been consistently above regional, state, and national levels for at least a decade. Per capita income is slightly below state and national levels at 92% and 98% respectively, although median household income significantly lags state and national levels, at 68% and 74% respectively.

The city has strengthened its financial operations and maintained ample reserve levels, ending the past four fiscal years with unreserved general fund balances equaling or exceeding 30% of spending, overcoming the structural challenges earlier in the decade. Wilmington projects that it will maintain its unreserved fund balance at or slightly below the 37% of fiscal 2007 and going forward it will limit drawdowns to funding one-time initiatives or capital projects.

The city has augmented and broadened its revenue base by accessing state funds for certain commercial filings and by enhancing its collection efforts. The city anticipates that it will increase its fund balance at the end of fiscal 2008. The fiscal 2009 general fund budget will increase by approximately 11%, including the city's planned assumption of public safety costs previously paid by a time-limited county grant.

The city's debt levels are moderate and expected to remain so. Overall debt equals roughly $3,000 per capita and 2.8% of market value. Including the current issue, amortization is marginally below average, with approximately 48% of outstanding debt retired within ten years. The fiscal 2008-2013 capital plan totals $166 million, including $128 million for public works. Funding will consist of $110 million of water and sewer debt, which Fitch credits as self-supporting, while the remainder will probably be funded by GO debt. The city is addressing its $96.6 million police and firefighter unfunded pension liability by reexamining its actuarial assumptions and limiting future benefit enhancements.

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