OREANDA-NEWS. Fitch Ratings has affirmed the following Indianapolis-Marion County Public Library, IN (the library) general obligation bonds:

--\\$25,450,000 outstanding series 2013 at 'AA+'
--\\$3,175,000 outstanding series 2012 at 'AA+'
--\\$8,140,000 outstanding series 2011 at 'AA+'
--Implied rating on unlimited tax general obligation (ULTGO) bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the library, payable from a limited ad valorem tax levied on all taxable property within the library's boundaries.

KEY RATING DRIVERS

LIMITED OPERATING RISK: The library is a single-purpose entity with limited operating risk.

SOUND FINANCES: The library's sound overall financial position is characterized by active management to align revenues and expenditures in the face of legislation affecting property tax revenues, strong reserves, and conservative budgeting.

MANAGEABLE LONG-TERM LIABILITIES: Debt ratios are low to moderate and amortization is rapid. Carrying costs are moderately high but manageable and not unusual for a single-purpose entity. Projected debt issuance over the next several years is not expected to alter debt profile.

DIVERSE AREA ECONOMY: The service area, which includes Indianapolis, benefits from a large and diverse economy.

RATING SENSITIVITIES

MAINTENANCE OF HEALTHY RESERVES: The rating is sensitive to management's continuation of strong financial and budgeting practices and maintenance of healthy reserves. The Stable Outlook reflects Fitch's belief that given management's proven history of proactively reducing spending to mitigate property tax revenue losses, overall financial health will continue.

INCREASED DEBT LEVELS: A material increase in debt levels beyond what is forecasted could reduce operating flexibility and place pressure on the rating.

CREDIT PROFILE

The library is an independent municipal corporation. The service area, which has a population of about 891,284, includes the city of Indianapolis and all areas of Marion County, except for the city of Beech Grove and the Town of Speedway, which maintain their own libraries.

The library is governed by a seven person board, whose members serve staggered terms of four years each. The Board of Commissioners of the Indianapolis Public Schools appoints two board members, three members are appointed by the Commissioners of Marion County, and the City-County Council appoints two.

The library system consists of the renovated and expanded Central Library, 22 branches, and three mobile units. Circulation, utilization and patron visits continue to be strong.

PRUDENT FISCAL MANAGEMENT PROVIDES FOR HEALTHY RESERVES

The majority (77%) of the library's revenues are derived from property taxes. The property tax base is diverse and collections are good, with total collections averaging 98% over the last three years. Community support is evidenced by foundation aid of about \\$2 million (about 5% of general fund revenues) annually through the Indianapolis-Marion County Public Library Foundation, a separately managed private foundation.

Management responded prudently to challenges presented by the 2007 state-wide 'circuit-breaker' legislation and has maintained sound financial operations despite decreases to property tax revenues triggered by the law. The legislation limits property taxes to a percentage of gross assessed value, depending upon the class of property.

The library's response included implementation of expenditure reductions through staffing adjustments, reduced service hours, energy conservation and debt refinancing. Service hours were cut by 26% in October 2010. In 2012, 20% of the 26% reduction was restored, to the level at which the library is currently operating and which will be the norm going forward.
These cuts, combined with the receipt of a local-option income tax beginning in 2008 to offset lower property tax revenues, stabilized financial operations in 2009 after two years of operating deficits and drawdowns on the reserve balance.

For 2014 (year-end Dec. 31), the library recorded an operating surplus after transfers of \\$1.5 million, leading to an unrestricted fund balance of \\$15.2 million or a healthy 40.4% of spending. The library prudently maintains a rainy day fund balance outside the general fund. At Dec. 31, 2014, the fund totaled \\$4.5 million, an additional 12% of general fund spending. The rainy day fund declined from \\$10.2 million at the end of 2013 due to a planned debt paydown.

For 2015 operations are currently on budget with the library projecting a small general fund surplus. A small draw down on the rainy day fund will reduce the balance to approximately \\$4 million. The 2016 operating budget is \\$39.8 million, relatively unchanged from 2015.

The library has a fund balance policy requiring the maintenance in the general fund of unrestricted balance equivalent to the amount necessary to avoid the need for tax anticipation warrants during the budget year - about \\$7.5 million. The library has consistently met this requirement, thereby eliminating any need to borrow to fund operations. Fitch expects reserves will be maintained at near current levels given management's past history and proven success of controlling expenses through prudent financial management.

MANAGEABLE LONG-TERM LIABILITIES

Debt ratios are low to moderate at \\$1,682 per capita and 4% of full value. Debt service constitutes a high 21% of total government spending, which is not unusual for a single-purpose entity and is partially due to rapid principal amortization, with 100% of debt maturing over the next 10 years.

As a result of the completion of a feasibility study, the library plans to issue approximately \\$50 million in bonds over the next several years to reconfigure some buildings and build a new facility in an area that is not currently being serviced. New debt is being structured to avoid a tax rate increase. Debt ratios are not expected to change materially as the majority of new debt is being layered in as old debt retires. However, if debt issuance exceeds the projected amount, operating flexibility could be reduced and put pressure on the rating.

Library employees participate in the Indiana Public Employees' Retirement Fund (PERF), a state-run, multi-employer defined benefit pension plan. As of June 30, 2014, PERF was 82.4% funded using a relatively conservative 6.75% return assumption. The library is required to contribute at an actuarially determined rate, which was 11.2% of annual covered payroll in 2014.

The library also provides other post-employment benefits (OPEB), which are funded on a pay-as-you-go basis. The plan's unfunded liability of \\$2.8 million at Dec. 31, 2014 was minor compared to the library's resources. Total carrying costs inclusive of pensions, OPEB and debt service are sizable at 23.4% of government fund spending.

LARGE AND DIVERSE SERVICE AREA

With a 2013 estimated population of 928,349, Marion County ranks as the state's largest county in terms of population. The county seat is Indianapolis (Fitch GO rating of 'AAA'), the state capital and largest city. The county and Indianapolis' populations have shown steady growth, with both increasing by approximately 2.8% since 2010.

The Indianapolis economy is well diversified and includes pharmaceutical production, health services, life and sciences companies, manufacturing and other business and professional services companies, which continue to lead city employment and industrial output. Major employers include Indiana University Health, Eli Lilly and Co. and, St. Vincent's Hospital. For May 2015 the unemployment rate for both the city and county was 5.2%, slightly higher than the 4.8% state rate but lower than the 5.3% recorded for the U.S. Employment and labor force year-over-year (May 2014 to May 2015) employment growth of 2.3% is strong, outpacing both state and national trends and outpacing labor growth of 0.8%.