Fitch Affirms Grand Blanc Township, (MI) Limited Tax GO's at 'AA'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--As part of its continuous surveillance effort, Fitch Ratings takes the following rating action Grand Blanc Township, MI's (the township) limited tax general obligation (LTGO) bonds:

--$10.5 million LTGO capital improvement bonds, Series 2006, affirmed at 'AA';

At this time, Fitch also assigns an implied unlimited tax general obligation rating of 'AA'.

The Rating Outlook is Stable.

RATING RATIONALE:

--Strong, conservative financial management has resulted in positive operating results and stable, satisfactory fund balance levels despite recent recessionary pressures.

--Sizeable declines in taxable value (TV) have pressured general fund operations, and the township levies the maximum property tax allowable under state law.

--The township has a manageable debt burden with no immediate plans for additional debt.

--While down from last year, the township's unemployment rate remains high, reflecting the large industrial component in the local economy.

KEY RATING DRIVERS:

--A critical consideration will be management's ability to maintain financial flexibility through stable reserves and cost management despite likely additional TV declines.

--While Fitch currently makes no distinction between the ULTGO and LTGO ratings, any meaningful erosion of overall financial flexibility would change the overall credit profile and could result in future rating differentiation between the two securities.

SECURITY:

The limited tax general obligation bonds (LTGO) are secured by the city's full faith and credit general obligation and its ad valorem tax pledge, subject to applicable charter, statutory and

constitutional limitations.

CREDIT SUMMARY:

Located in Genesee County, Grand Blanc township is about 60 miles northwest of Detroit. While the township is home to two General Motors (GM) plants, the local economy is anchored by the Genesys Health System, which is a member of Ascension Health (rated 'AA+' by Fitch) and the township's top employer. Magna Electronics Technology recently announced plans to invest $64.8 million to expand its manufacturing facility in the township which is expected to create up to 385 new jobs over the next five years. Unemployment data for the township is not available; however, in March 2011 the county's rate of 11.8% -- which while considerably lower than the 15.2% reported in March 2010 -- was slightly above the state at 11% and quite a bit higher than the nation at 9.2% during the same month. Foreclosures in the township are on the decline with 95 reported as of June 2011, down from 265 during the same period in 2010. Wealth levels in the area remain above average despite the economic downturn with median household income at 121% and 115% of the state and national averages, respectively. The 2010 census reports a robust population gain of approximately 25% for the township; in contrast, the state lost 0.6% during the last decade and was the only state in the nation to lose population.

TV declined by 7.8% in fiscal 2011 for the third consecutive year with the largest decline of 11.9% occurring in fiscal 2010. Further TV declines are expected in fiscal 2012; however, given the commercial projects currently underway the township reasonably expects a small recovery in fiscal 2013. Declines in TV are cause for concern as property tax revenue is the township's largest revenue source at approximately 68% of total revenues. To offset the TV declines the township increased its operating millage in fiscal 2009 to the maximum under the Headlee amendment. The township's second largest funding source is state-shared revenue (17%), which has also shown some declines over the past several years. However, the larger than anticipated increase in population in the 2010 census will likely provide for an increase in state revenues over current projections.

In order to mitigate the property tax revenue declines, the township has reportedly eliminated all non-essential spending, achieved concessions in the health care plan to include more employee contributions, eliminated positions using attrition, and has focused on consolidation and cross training of employees where possible. The township ended fiscal 2010 with a net surplus for the fifth consecutive year, adding approximately $367,000 to unreserved general fund balance, bringing the level to 14.3% of expenditures (up from 13.1% in the prior year). A nominal general fund balance draw was originally included in the fiscal 2011 budget but may not materialize due to the likely increase in state shared revenues based on the large increase in population. The township now expects to end fiscal 2011 with a small surplus and an unreserved general fund balance of approximately 15% of expenditures. While the town maintains some additional cushion in the Master Campus fund due to the cancellation of some projects associated with the 0.7 dedicated portion of the operating millage, the township has stated that those funds are dedicated to debt service payments on the recently completed bond funded police station.

The township's overall debt burden is average at $2,755 per capita and 3.9% of market value, and there are no immediate plans for additional debt. Principal amortization is also average with 47% of the total outstanding debt retired within ten years. The township contributes to the Michigan Municipal Employees Retirement System (MERS), an agent multiple-employer defined benefit plan as well as a separate defined contribution plan. Annual required contributions are regularly funded at 100% and the MERS plan was 56% funded as of 12/31/2009; using Fitch's more conservative 7% return rate the plan is 51% funded. Other post employment benefits (OPEB) are being funded on a paygo basis, and the city contributes 100% of the annual costs consistently. The current OPEB unfunded actuarial liability of $2.3 million is less than 1% of total market value.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, LoanPerformance, Inc., IHS and Global Insight

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 16, 2010).

--'U.S. Local Government Tax-Supported Rating Criteria' (Oct. 08, 2010).

For information on Build America Bonds, visit www.fitchratings.com/BABs.

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566

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