Fitch Affirms Delta Charter Township, MI's GO LT Bonds at 'AAA'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--

As part of its continuous surveillance effort, Fitch Ratings affirms the following Charter Township of Delta, Michigan (the township) bonds:

--$5.2 million outstanding general obligation limited tax (GOLT) bonds, series 2003 at 'AAA';

--$5.6 million outstanding capital improvement GOLT bonds, series 2006 at 'AAA';

--$7 million outstanding library GOLT bonds, series 2007 at 'AAA'.

In addition, Fitch assigns an implied unlimited tax general obligation rating at 'AAA'.

The Rating Outlook is Stable.

KEY RATING DRIVERS

--Financial margins and resulting fiscal flexibility are extraordinary with general fund balances exceeding 75% for at least the last five years.

--Management has demonstrated a consistent record of financial stewardship reinforced by conservative fiscal policies.

--The township is advantageously located adjacent to the state capital and proximate to numerous employment opportunities.

--General Motors Corporation (GMC) has a major presence within the local community.

--Pension and other post employment benefit (OPEB) liabilities are well managed.

SECURITY

The GOLT bonds are secured by the town's full faith and credit limited taxing power, subject to applicable constitutional, statutory and charter tax rate limitations.

CREDIT PROFILE

Delta is advantageously located directly west of the state capital city of Lansing on I-69 and I-96, which provides residents access to numerous employment opportunities throughout the metropolitan region. The tax base has softened in recent years, realizing slightly over 4% annual declines in 2010 and 2011. The township expects a similar decline in 2012 and stabilizing thereafter, which is consistent with other regional communities. Despite the languid economy, the township continues to experience economic expansion. Most notably, Auto-Owners Insurance is undergoing a multi-year $105 million expansion of its national headquarters, and projects adding 800 additional jobs over the next several years.

Socioeconomic indicators are positive with above-average wealth and education levels and below-average unemployment rates. The June 2011 county unemployment rate of 7.9% was below both the state (11%) and national (9.3%) averages. The township's population continues to grow with greater than a 9% increase over the past decade.

GMC, which operates one of its newest plants within the township's borders, is both the de facto largest employer and property taxpayer. GMC recently added a third shift at its Delta plant, resulting in 700 additional jobs and increasing total employment to roughly 4,100 at the complex. These employment figures compare to 1,900 people employed at the complex in 2009. Under an intergovernmental agreement with the city of Lansing, Delta transferred the GMC plant to Lansing's jurisdiction for 25 years, and in return receives half of the property taxes, calculated at Lansing's higher tax rate. Thus, while GMC appears on the township's tax roll in a limited capacity, it accounts for 7% of total property tax revenues in 2011.

The township has generated general fund operating surpluses for four of the past five years despite a difficult economic environment. General fund revenues have been softening moderately over the past few years, driven by a decline in intergovernmental revenues and, more recently, property tax revenues. Township officials have been successful in offsetting revenue losses through staffing reductions through attrition and containing costs associated with outsourced police services to the county.

Fiscal 2010 ended with a $0.3 million general fund surplus after transfers, increasing the unreserved fund balance to $13.6 million, or a high 90% of spending. The fiscal 2011 budget is balanced, and township officials are now projecting a small general fund surplus based on mid-year results. Future revenue raising ability is constrained as Delta is currently levying at its maximum allowable millage. However, the township appears to retain some expenditure flexibility. Management expects to maintain structural balance for the next several years with potential fund balance draws for one-time uses.

The overall debt burden is easily managed at $3,039 per capita and 3.9% of market value. Principal amortization is above average with 59% repaid in 10 years, and debt service as a percentage of general fund spending equaled a modest 4% in 2010. The five-year capital improvement plan (CIP) totals $110 million, and management does not anticipate issuing any additional debt to support the CIP for the next three years. Pension and OPEB liabilities are well managed, and 2010 pension costs equaled a moderate 6% of general fund spending.

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, and IHS Global Insight.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria,' dated Aug. 15, 2011.

--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 15, 2011.

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=648898

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842

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