NEW YORK--(BUSINESS WIRE)--As part of its continuous surveillance effort, Fitch Ratings takes the following rating action on Lincoln Charter Township, MI's (the township) unlimited tax general obligation (ULTGO) bonds:
-- $400,000 ULTGO fire station bonds, upgraded to 'AA' from 'AA-';
-- $1.35 million ULTGO library bonds, upgraded to 'AA' from 'AA-'.
The Rating Outlook is revised to Stable from Positive.
-- The upgrade to 'AA' reflects the long-standing commitment of the township's solid financial management team to conservative budgeting and sound fiscal policies and practices;
-- The township has consistently maintained large general fund balances; the total currently is well above the target of 50% of annual spending on a cash basis;
-- Taxable values (TV) have remained stable;
-- The township's debt profile features below-average debt ratios, rapid amortization and little to no debt planned for the near future.
KEY RATING DRIVERS:
-- Sustained financial flexibility by a continued demonstration of conservative budgeting and expenditure controls.
The bonds are secured separately by dedicated unlimited voter-approved levies, outside the township's general operating millage, that are adjusted to yield sufficient revenue to pay debt service on the respective bonds.
Lincoln Township is located in Berrien County, approximately 90 miles east of Chicago in the southwestern portion of Lower Michigan. Local employers include the school district, Martin's supermarkets, Meijer, and IPC Communications. There is limited exposure to the automotive industry through Bosch Braking Systems which has maintained employment levels after a significant staffing reduction in 2009. Unemployment for the region was 11% in February 2011, which is on par with the state (11%) but higher than the national average (9.5%). Wealth levels in the region are below average at 96% of the state and 85% of the national averages. The city's tax base is diversified and the top ten tax payers account for less than 7% of TV. While TV dropped by 2% in fiscal 2010, the housing market in Lincoln has remained stable and TV grew by 1.7% in 2011.
Lincoln's financial position has been consistent, characterized by large reserve levels and well-managed operations despite limited revenue raising flexibility, as the township is at its maximum property tax limit. The township's unreserved general fund balance equaled $1.4 million or 84.8 % of expenditures in fiscal 2010 and preliminary results for 2011 show an increase in fund balance to 91.6% of expenditures. The township has conservatively budgeted for a 7% decline in fiscal 2012 in state shared revenues, the largest revenue source for the general fund. State shared revenue and property tax revenue account for 48% and 42% of total general fund revenues, respectively. The township has indicated that they expect further decreases to state shared revenues and will continue to budget conservatively while making expenditure reductions when possible in order to maintain balanced operations. Despite the declines in TV and state revenues, the township's ability to maintain reserves at above average levels demonstrates management's commitment to conservative fiscal operations.
The township's debt profile, which is mostly comprised of debt issued through joint ventures for water system improvements, is below average. Net direct debt levels are low at 0.2% of market value and $177 per capita. Overall debt levels are also low at 1% of market value and $1,070 per capita. Principal amortization is above average with 55% retired in ten years and future capital needs are minimal. Pension obligations are provided through a privately administered defined contribution plan and the 2010 costs were manageable at 11% of general fund expenditures.
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).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria