Fitch Rates City of De Pere, WI's GOs 'AA+'; Outlook Stable

NEW YORK--()--Fitch Ratings--15 October 2014: Fitch Ratings has assigned an 'AA+' rating to the following City of De Pere, Wisconsin (the city) bonds:

--Approximately $1,075,000 general obligation (GO) street improvement bonds series 2014A;

--Approximately $2,550,000 GO promissory notes series 2014B.

The bonds and notes are expected to sell competitively on October 21.

Proceeds of the series 2014A bonds will fund various street improvements within the city.

Proceeds of the series 2014B notes will fund various municipal improvements and will also current refund a portion of the city's outstanding 2004C series GO bonds.

In addition, Fitch affirms the following ratings:

--$31.9 million outstanding GO bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the city to which the full faith, credit and power of the city to levy unlimited ad valorem taxes are pledged.

KEY RATING DRIVERS

HEALTHY UNDERLYING ECONOMIC CHARACTERISTICS: The city's central location and close proximity to Green Bay, along with its highly regarded school districts and strong transportation network, has resulted in stable and healthy economic indicators.

STRONG FINANCIAL FUNDAMENTALS: The city benefits from conservative budgeting and prudent financial practices, as evidenced by consistent balanced operations and strong, stable reserve levels.

MANAGEABLE DEBT PROFILE: The city's aggregate debt burden is moderate and should be sustainable given fairly rapid debt amortization and manageable capital needs. The city continues to fully fund pension obligations and has no other post-retirement benefit obligations.

RATING SENSITIVITIES

STABLE CREDIT PROFILE: The rating is sensitive to shifts in fundamental credit characteristics, including the city's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.

CREDIT PROFILE

The city is located approximately five miles south of Green Bay along the Fox River in Brown County. De Pere is part of the third largest economic center in Wisconsin and the region is the dominant retail center in northeastern Wisconsin and Upper Michigan. The 2013 population estimate of 24,359 represents an 18.4% increase from 2000.

ECONOMY BENEFITS FROM PARTICIPATION IN GREEN BAY MSA

An expanding service sector has fostered diversification in the regional economy, reducing historical dependence on non-durable goods manufacturing (particularly paper products). Major city employers include Humana Health Care (approximately 3,170 employees), Belmark, Inc. (label and tag printing - 616 employees), Saint Norbert College (510 employees) and RR Donnelley (direct mail marketing - 341 employees).

Unemployment rates are not available for the city, but Brown County and Green Bay's unemployment rates have historically been below state and national averages. In August 2014, the county and the Green Bay MSA recorded unemployment rates of 4.6% and 4.7%, respectively, lower than the 5.1% recorded for the state and 6.3% for the U.S. City wealth levels, as measured by median household income, are comparable to the state (107.1%) and national (106.3%) averages.

STABLE AND DIVERSE TAX BASE

The city's tax base, which is 63% residential, continues to grow slowly. Taxable assessed value (AV) for fiscal 2014 increased slightly by .9% from fiscal 2013, and has increased 3.6% since fiscal 2008. The city reports that its approach to business investment through the use of tax increment financing has contributed to ongoing economic development. The tax base is diverse, with the top 10 taxpayers comprising 8.5% of AV. Property tax collections are 100% guaranteed by the county and represent approximately 53% of general fund revenues. The city's housing market proved to be fairly stable throughout the recession, and the city's Zillow home value index for September 2014 is above its pre-recession peak.

STRONG FINANCIAL FUNDAMENTALS

The city finished fiscal 2013 with a small deficit of $156,000, which was less than the budgeted deficit of $291,000. The fiscal 2013 deficit was largely driven by investment returns that came in significantly under-budget. The fiscal 2013 deficit reduced unrestricted general fund reserves to $5.3 million, or a still solid 34.6% of general fund spending. Management's early estimates for fiscal 2014 (ending December 31st) show a modest general fund surplus of $50,000 to $100,000. The city continues to comply with its strong general fund balance policy of maintaining unassigned reserves between 25% and 35% of spending.

Fitch believes the city's stable economy, conservative budgeting practices, forward-looking management, and adherence to its strong fund balance policy should contribute to the maintenance of sound reserves going forward.

MANAGEABLE LONG-TERM LIABILITIES

The aggregate debt burden is moderate at $3,290 per capita or 4.4% of full market value. The city utilizes a variety of alternative revenue sources, including tax increment financing and special assessments to reduce the impact of debt service on the general tax base. Additionally, the city maintains a voter approved ongoing street improvement levy which offsets spending pressure. Principal amortization of outstanding debt is rapid with 80% repaid in 10 years.

City employees participate in the Wisconsin Retirement System (WRS), a cost-sharing, multiple-employer defined benefit plan. When adjusted to Fitch's conservative 7% investment rate of return, the plan is very well-funded at approximately 97.8% (as of Dec. 31, 2012). The city fully funds its actuarially determined annual required contribution. The city does not provide or subsidize material post-employment health benefits to its employees. Carrying costs for pension and debt service are elevated at 26% of fiscal 2013 total governmental spending, which is reflective of the city's rapid amortization. With the city's plans to continue annual bond issues sized at the current level, Fitch expects both the fixed cost burden and the overall debt profile to remain fairly stable.

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

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors, Underwriter, Bond Counsel, Underwriter Counsel, Trustee, and Zillow.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=898174

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Contacts

Fitch Ratings
Primary Analyst
Brendan Scher
Analyst
+1 212-908-0686
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Karen Wagner
Director
+1 212-908-0230
or
Committee Chairperson
Steve Murray
Senior Director
+1 512-215-3729
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Brendan Scher
Analyst
+1 212-908-0686
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Karen Wagner
Director
+1 212-908-0230
or
Committee Chairperson
Steve Murray
Senior Director
+1 512-215-3729
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com