OREANDA-NEWS. June 30, 2015. Fitch Ratings has affirmed the following North Olmsted, Ohio (the city) bonds:

--\\$12,270,000 limited tax general obligations (LTGO) bonds, series 2006A and series 2006C;
--\\$7,050,000 unlimited tax general obligation (ULTGO) bonds, series 2006B and series 2006D.

The Rating Outlook is Stable.

SECURITY

The ULTGO bonds are payable from the city's full faith and credit and its power to levy ad valorem taxes without limitation as to amount or rate.

The LTGO bonds are payable from the city's full faith and credit and its power to levy ad valorem taxes, subject to the city charter's 11.1-mill rate limitation.

KEY RATING DRIVERS

HEALTHY ECONOMIC INDICATORS: The city's economy is characterized by above-average wealth indicators, low unemployment, and a stable population.

INCOME TAX RELIANT: Economically sensitive income tax revenues are the largest source of general fund revenues and are concentrated among the top 10 employers. The recession adversely impacted income taxes, but receipts have rebounded over the last few years due to the economic recovery.

SOUND FINANCIAL MANAGEMENT: Prudent financial management and conservative budgeting have resulted in strong reserve levels and ample financial flexibility.

MANAGEABLE LONG-TERM LIABILITIES: The city's debt burden is characterized by low debt ratios, rapid amortization, moderate carrying costs and limited capital needs. In addition, the debt profile benefits from voter-mandated income tax revenue dedicated to pay-go capital financing.

ULTGO and LTGO ON PAR: The lack of distinction between the ULTGO and LTGO ratings reflects the city's ample financial flexibility.

RATING SENSITIVITIES

MAINTENANCE OF ADEQUATE RESERVES: Given the city's reliance on economically sensitive income taxes, continued expense control and maintenance of adequate financial reserves will be key to rating stability.

CREDIT PROFILE

Located in Cuyahoga County, approximately 13 miles southwest of downtown Cleveland, North Olmsted is a relatively wealthy built-out residential community with a 2013 estimated population of 32,292, a modest 1.3% decline from 2010.

SOLID ECONOMIC PROFILE

Proximity to downtown Cleveland has led to the city's development as a residential and retail center for Cleveland's western suburbs, attracting a well-educated, affluent workforce. Median household income of the city equates to 136% of the county, 121% of the state, and 112% of the nation.

The city's economy is moderately concentrated in retail activity, with a presence of office space, and light industrial development. Unemployment is consistently below county, state and national levels, equaling 4.8% in March 2015, compared to 5.8%, 5.4%, and 5.6% for the county, state and nation, respectively.

After declining by 5.1% in 2012 due to a county-wide sexennial reappraisal, assessed valuation appears to have stabilized with city management expecting little to no change for the triennial evaluation in 2015. Over the last few years, a number of car dealerships along the North Olmsted Auto Mile, in addition to the Great Northern Mall, have completed expansions and renovations adding to assessed value.

SOUND FINANCIAL PERFORMANCE

Income and property taxes are the largest sources of general fund revenues, comprising approximately 52% and 23%, respectively in 2014.

The city currently levies and collects an income tax of 2% on all income earned within the city as well as income of residents earned outside the city. The city allows a credit of 100% of the tax paid to another municipality, not to exceed the amount owed. Voter approval would be required to increase the rate above 2% and council approval would be needed to reduce the 100% credit. Income tax revenues are concentrated with the top 10 employers comprising approximately 30% of total income tax revenues in 2014. After declining 9.8% from 2007 to 2010 due to the recession, total income tax revenues rebounded in 2011 and have increased every year since, with 2014 income taxes 6.7% higher than the prior year.

The city's charter is unique in that it does not require the city to share its millage with any other taxing entity, as generally dictated by state law. Instead of the standard 10.0 mill limitation, the city currently levies 11.1 charter mills for any city purpose, as agreed upon by the voters. In addition, a .70 recreation mill levy is permanent and does not require voter renewal. Debt service levies are in place for the term of outstanding bonds.

The property tax base is diverse with the top 10 property taxpayers comprising a moderate 13.6% of assessed value. Total property tax collections are good, averaging 98% over the last three years.

The city experienced five consecutive years of surpluses after transfers from 2009 to 2013. For 2013 (year-end Dec. 31), the city recorded a general fund surplus of \\$247,000 (1.3% of spending). The unrestricted fund balance totaled \\$6.3 million or a strong 33.5% of general fund spending.

On a draft unaudited basis, 2014 results show a small general fund operating deficit of \\$207,000 (1% of spending). An increase in income taxes was offset by a small decline in property taxes and higher expenditures due to increased healthcare costs and inclement weather resulting in higher overtime.

For 2015, general fund expenditures are budgeted at \\$21.1 million, a decline from \\$21.4 million budgeted in 2014. Despite a 2% salary increase granted to most employees, the cost is partially offset because city workers' share of health insurance costs increased by 1%. The budget includes spending \\$3.2 million in reserves, but management expects balanced operations as the city typically spends less than it projects.

From 2008 through 2011, the city implemented cost saving measures which included layoffs, furlough days and wage cuts to keep budgetary balance. Given management's history of conservative budgeting Fitch expects the city's financial position to remain sound, characterized by ample reserves and financial flexibility.

MANAGEABLE LONG-TERM LIABILITIES

The city's credit profile benefits from low debt and manageable long-term liabilities. Overall debt is \\$1,060 debt per capita and 1.5% of market value. Fitch expects debt levels to remain modest as amortization is rapid with 94% of debt retired within 10 years. Borrowing needs are limited as a result of a voter-mandate dedicating 15% of city income tax receipts for permanent improvements of streets and storm sewers; funds are deposited in the permanent improvement fund (approximately \\$2.1 million in 2014).

The city participates in and continues to make 100% of its annual statutorily required contributions to multiple-employer, cost-sharing state plans to fund both pension and other post-employment benefits. The largest, the Ohio Public Employees Retirement System, reported a funded ratio of 80.9% as of Dec. 31, 2013. Using Fitch's more conservative 7% rate of return, the estimated funded ratio is 73%. Carrying costs for debt service, pension and OPEB are manageable at 18.5% of government fund expenditures.