OREANDA-NEWS. Fitch Ratings assigns an 'AAA' rating for the following city of Norwalk, CT's (the city) general obligation (GO) bonds:

--\$17,000,000 issue of 2015.

The bonds are scheduled to sell competitively on June 30. Proceeds are being used to support various capital improvements.

In addition, Fitch affirms at 'AAA' the rating on the city's following outstanding bonds:

--\$84 million GO bonds, series 2009E; series 2010E, series 2010F, series 2011B, series 2012B, series 2013, series 2014.

The Rating Outlook is Stable.

SECURITY

The bonds are backed by the city's full faith and credit and unlimited taxing power.

KEY RATING DRIVERS

STRONG FINANCIAL MANAGEMENT: Financial flexibility continues to be ample with satisfactory fund balance levels as a result of conservative budgeting practices and steady tax rate increases. Sound financial policies underscore the city's prudent financial management.

SOUND ECONOMIC PROFILE: The city's economy benefits from its proximity to New York City and major Connecticut labor centers. Healthcare, retail, and financial and professional services have a large presence in the local economy. Wealth levels exceed state and national averages.

LOW DEBT BURDEN: Overall debt levels are expected to remain low given the city's moderate additional debt plans, rapid par amortization, and prudent debt policies.

MANAGEABLE OPEB AND PENSION COSTS: Pension and OPEB obligations are well-managed, as evidenced by annual contributions to an OPEB trust and full funding of actuarially-based pension contributions. Enacted pension reforms should contain the trajectory of pension costs.

RATING SENSITIVITIES
The rating is sensitive to shifts in the city's strong financial management practices and maintenance of reserves within policy levels. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.

CREDIT PROFILE

Norwalk is located on the Long Island Sound, roughly 50 miles northeast of New York City, near several other Connecticut cities, including Stamford, Bridgeport and New Haven. Its 2013 population of 87,776 is up 5.8% since 2000.

HIGH WEALTH AND DIVERSE ECONOMY

Health care, financial and professional services, and retail sectors drive the city's local economy. The city's largest private employer, Norwalk Hospital, a teaching facility for the Yale School of Medicine, is currently expanding. The second largest employer is GE Capital which recently announced it will sell most of its operations, and retain three divisions. GE Capital primarily leases its space within the city, including space in a corporate park served by a metro north train station. The city's low unemployment rate and the likelihood that a number of potentially affected employees live outside the city, temper the potential impact of the announcement. Moreover, some of the retained GE Capital divisions are consolidating operations to Norwalk.

Building permit valuations have exceeded pre-recession levels in each of the past two years which bodes well for future tax base growth. Though little vacant land remains within the city, mixed-use redevelopment is occurring in the urban corridors. Planning is also well underway for an upscale mall at the intersection of I95 and Route 7.

Market value per capita is a high \$192,444 based on the fiscal 2015 market value (MV) of \$16.9 billion. While property values declined 7.7% in the tax base revaluation for fiscal 2015, Norwalk's values fared better than neighboring communities'.

Wealth levels are high with median household income at 109% and 142% of state and national levels, respectively. Poverty is 9.7%, well below the national rate of 15.4%. Norwalk's unemployment rate of 5.8% (March 2015) is lower than the state average and an improvement from 6.2% a year ago. Over the past year employment growth has continued its trend of strong growth, outpacing gains in the labor force.

STRONG FINANCIAL MANAGEMENT
The bulk of the city's revenues are derived from property taxes (84% of fiscal 2014 general fund revenues), which have increased steadily the last five years. The tax base is diverse and tax collection rates are strong, bolstered by biennial tax sales.

Management budgets conservatively and in fiscal 2014 both general fund revenues and expenditures outperformed budget. The city closed the year with a \$4.0 million general fund operating surplus, equal to 1.2% of spending. The surplus increased the town's unrestricted general fund balance (committed, assigned and unassigned) to \$37.5 million or a sound 11.3% of expenditures, satisfying the city's formal fund balance policy of 5%-10% of budgeted revenues. Fitch considers this policy level adequate given the relative stability of the city's revenue base and consistent financial performance.

CONTINUED FINANCIAL STABILITY FORECAST

The city is projecting stable year-end results for fiscal 2015. The five-year revaluation resulted in a decline in taxable values but the city increased the levy by 3.2% to insulate revenues. Pension contributions and education were the primary cost drivers.

The fiscal 2016 budget of \$327 million reflects a 3% increase over the prior year budget. The grand list showed .7% growth and the tax rate increases 1.5%, for a total tax levy increase of 2.2%. The city continues the historical practice of conservatively budgeting for contingencies. The fiscal 2016 budget includes a \$1 million appropriation of reserves, but also includes \$1 million contingency appropriation. All labor contracts are in place through the end of fiscal 2016, easing the need for a contingency.

LOW-RISK DEBT PROFILE

Fitch expects debt levels to remain low given the moderate borrowing plans and rapid amortization of existing debt. Overall debt is \$2,898 per capita and 1.5% of market value. Amortization of outstanding principal is rapid with 74% retired in 10 years. The fiscal 2016-2020 capital improvement plan totals a moderate \$126 million and proposes annual debt financing, focused on public works, school and sanitary sewer investments.

PRUDENT MANAGEMENT OF OTHER LONG-TERM OBLIGATIONS

The city continues to fund post-employment health care benefits (OPEB) above annual pay-go levels. The fiscal 2014 employer contribution was \$15.1 million relative to benefit and administrative expenses of \$10.8 million. An irrevocable trust was established in fiscal 2007 with assets of \$49.5 million at the close of fiscal 2014. The unfunded accrued liability was \$244.7 million as of July 1, 2014, a manageable 1.4% of the market value of real property.

City charter requires the city to fully fund the annual actuarially required contributions for pensions, a practice Fitch views as favorable to credit quality. The city's four pension plans are funded at a Fitch-estimated 81% on an aggregate level, using a 7% investment return rate. The requirement of full ARC funding, recent pension reforms and prudent actuarial amortization assumption should lead to gradual improvement in the funded ratios. The total net pension liability as of the July 1, 2014 actuarial report was a low \$89 million, or .5% of the market value of real property. The city's total fiscal 2014 carrying costs for debt service, pension and current OPEB contributions were a moderate 13% of governmental spending.