Fitch Rates Hinsdale Village, IL's ULTGOs 'AAA'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has assigned an 'AAA' rating to the following Hinsdale Village, IL (the village) unlimited tax general obligation (ULTGO) bonds:

--$2.745 million general obligation refunding bonds (library fund tax alternate revenue source), series 2013A.

The bonds are expected to sell via competitive sale on March 5, 2013. Proceeds will refund outstanding series 2006 bonds.

In addition, Fitch affirms the following bonds at 'AAA':

--$465,000 ULTGO shared state income tax bonds, series 2003;

--$220,000 ULTGO library fund tax bonds, series 2006;

--$2,965,000 ULTGO waterworks & sewer bonds, series 2008C;

--$2,020,000 LTGO bonds, series 2009;

--$5,000,000 ULTGO bonds, series 2012A.

The Rating Outlook is Stable.

SECURITY

The 2003, 2008C, 2012A and 2013A series are secured by various village revenues with the ultimate security derived from a pledge of ad valorem taxes without limitation as to rate or amount.

The 2009 bonds are secured by ad valorem taxes without limitation as to rate. The amount of taxes that may be extended to pay the bonds is limited by the property tax extension limitation law.

KEY RATING DRIVERS

RATING REFLECTS ULTGO PLEDGE: Fitch recognizes the strength and strong coverage provided by the primary pledged revenues; however, the 'AAA' rating for the current issue is based upon the village's ultimate ULTGO pledge.

LTGO AND ULTGO RATINGS ON PAR: Highest quality ratings for both limited and unlimited tax bonds are supported by the village's superior socioeconomic profile, moderate long-term obligations and favorable financial position. The LTGO and ULTGO ratings are on par, as a result of the village's ample financial flexibility.

AMPLE FINANCIAL FLEXIBILITY: General fund reserves have grown in each of the last four fiscal years as a result of conservative fiscal budgeting and management. These Sizable reserve balances, in concert with the village's conservative and proactive approach to fiscal management, afford considerable financial flexibility.

SUPERIOR SOCIOECONOMIC PROFILE: The village is centrally located within the Chicago metropolitan area and has an affluent and highly skilled labor force contributing to a stable local economy.

WEAK PENSION FUNDING: Pension funding levels are generally below average, but the village has been overfunding two of the three plans to improve their status.

RATING SENSITIVITIES

The rating is sensitive to shifts in fundamental credit characteristics. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.

CREDIT PROFILE

SUPERIOR SOCIOECONOMIC PROFILE

Hinsdale is a wealthy suburb whose desirable location within the Chicago metropolitan area attracts affluent and highly skilled residents. Per capita income levels are very high at 257% of the state and 271% of national averages and 74% of residents have achieved higher education. Market value per capita is substantial at $305,000.

Unemployment data for the village is unavailable; however, DuPage County reported 6.9% unemployment in December 2012, lower than the state rate of 8.6% and the national rate of 7.6% for the same month. The majority of the village is located in DuPage County, with the remainder in Cook County.

AMPLE FINANCIAL FLEXIBILITY

Solid reserves, careful expenditure controls, a diverse revenue stream and the inclusion of significant discretionary expenditure items yield considerable financial flexibility. Conservative budgeting on both the revenue and expenditure sides contributed to general fund operating surpluses (after transfers) in the past four audited fiscal years, culminating in a year-end fiscal 2012 unrestricted general fund balance of $4.8 million or 25.3% of spending.

Fiscal 2012 resulted in an $815,000 general fund surplus after transfers (4.3% of spending). The surplus was driven by permit fees coming in $267,000 over budget and sales tax revenues almost $200,000 over budget. The village transferred $1.5 million to be used for pay-go capital, and $200,000 was used for discretionary pension contributions above the annually required contribution.

The village is ahead of budget for fiscal 2013, with income and sales tax revenues both trending positively and expenses below budget. Management expects to finish the year with fund balance largely unchanged as, like in fiscal 2012, excess funds will be used to fund future capital expenses and for approximately $150,000 of discretionary pension contributions. The preliminary fiscal 2014 budget also assumes balanced operations, with conservative assumptions and increased infrastructure funding.

The village's diversified revenue base including property taxes, sales taxes, state income taxes and utility taxes, and beginning in 2011 a voted 1% non-home rule sales tax, has provided stability during the recent economic recession. Taxable valuation declined by 5% in fiscal 2011 and another 8.6% in fiscal 2012. A number of new development projects should help stabilize the village's taxable valuation.

Recent expenditure control measures have included outsourcing of police and fire dispatch, execution of a mutual aid agreement for fire services, and reduction in headcount through attrition, layoffs, and an early retirement program. The village is also exploring the possibility of merging its police force with a neighboring municipality, which would yield further operational savings.

MODERATE LONG-TERM OBLIGATIONS

The village plans to dedicate $5 million-$6 million annually, on a pay-go basis, toward a 15-year, $86 million infrastructure improvement plan to improve streets and the water and sewer systems. The majority of the plan will be funded on a pay-go basis, but the village anticipates a $5 million general obligation borrowing in fiscal 2015. Direct debt levels are modest, but considerable overlapping borrowing results in an overall debt burden that is a moderate 2.2% of full value and a high $6,690 per capita. Principal amortization is rapid with 74% of debt scheduled for retirement within 10 years.

The village contributes to the Illinois Municipal Retirement Fund (IMRF), a defined benefit agent multiple employer retirement system as well as two defined benefit single employer plans for police and fire sworn personnel. The village has made its full annually required contribution for all three plans, with extra payments to the single employer plans made in 2010 and in 2012. The extra payments in fiscal 2012 were $100,000 per plan, and the village anticipates making additional payments of approximately $75,000 per plan to the single employer plans in fiscal 2013.

The IMRF plan has the weakest funding status of the three plans, with a funded ratio of 52.3% when adjusted by Fitch to reflect a 7% investment return assumption. The fire plan is 64.3% funded (Fitch-adjusted) and the police plan is 75.2% funded (Fitch-adjusted). Annual required pension costs for the village are manageable at 10% of governmental fund spending. Other post-employment benefits (OPEB) are also being provided through the three plans on a pay as you go basis and the unfunded actuarial liability is minimal. Total carrying costs for debt service, annually required pension payments, and OPEB are a 19.7% of governmental expenditures.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

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, Bond Counsel, and Financial Advisor.

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.