OREANDA-NEWS. Fitch Ratings has affirmed its 'AA+' rating on the following Village of Wheeling, IL general obligations (GO):

--$5.79 million GO refunding bonds, series 2011;
--$3.52 million GO sales tax refunding bonds, series 2012A;
--$3.25 million GO water system refunding bonds, series 2012B.

The Rating Outlook is Stable.

SECURITY
All GO bonds are backed by a pledge of ad valorem taxes levied against all taxable property within the village without limitation as to rate or amount. The GO sales tax bonds are additionally payable from sales tax distributions to the village from the state.
KEY RATING DRIVERS

OPERATIONAL PERFORMANCE: The 'AA+' rating reflects the village's stable financial operations and substantial level of reserves. Broad budgetary flexibility has mitigated the budgetary impact of the significant erosion of equalized assessed valuation (EAV) from 2010 through 2014.

STABLE ECONOMIC PROFILE: Village residents benefit from proximity to employment opportunities in Chicago as well as in its own modest business and industrial sectors. Unemployment remains below the state and nation.

MODERATE DEBT BURDEN: Wheeling's debt profile benefits from moderate debt ratios and minimal future debt plans, supported by pay-go funding of capital. Carrying costs for debt, pension and other post-employment benefits (OPEB) comprise a moderate part of the village's budget. A high portion of the debt is synthetically fixed and therefore subject to risks associated with liquidity and swap agreements.

RATING SENSITIVITIES
DECLINING RESERVE LEVELS: The village has maintained substantial reserve levels over the past five years. Significant declines in general fund balance could trigger a downgrade.

CREDIT PROFILE

The village of Wheeling is favorably located approximately 25 miles northwest of downtown Chicago. The village benefits from good highway access and is home to a commuter rail station which links residents to Chicago. The village has had steady growth reflected in the 2010 Census population of 37,648, which grew 9.1% from the previous decade.

SOLID ECONOMIC PROFILE TEMPERED BY TAX-BASE DECLINES

Wheeling residents benefit from proximity to employment opportunities in Chicago, augmented by commercial, manufacturing and trade sectors within the village. Wheeling's unemployment rate of 3.6% in October 2015 compares favorably to state and national rates of 5.3% and 4.8%, respectively while labor force participation increased by 2% in 2014. Wealth levels are mixed, but generally compare favorably to state and national averages. Median household income approximates the state and the nation at 101% and 103% of medians, respectively and the poverty rate was 5.3%, below the state's 14.4% and nation's 15.5% rates in 2014. The village's per capita income is below the state and nation at 82% and 86% of medians, respectively.

The village experienced a 38% decline in taxable property assessed valuations from fiscal 2010 through 2014 (the decline in fiscal 2014 was a high 16%). Favorably, assessed values increase by 2.25% in fiscal 2015, reflecting stabilization within the local economy and housing market. The village's home rule status affords it significant revenue-raising flexibility, exempting it from the state-wide levy limitation and providing opportunity to offset declines in EAV and access a variety of taxes and fees, if required.

Some economic development in the village continues, with a number of small commercial and industrial projects currently under development. The village has a fairly diverse tax base with the top 10 taxpayers comprising about 10.6% of total EAV in fiscal 2014.

SOLID FINANCIAL PROFILE

Wheeling's financial position is marked by good revenue diversity, a history of high fund balances, conservative budgeting, and multi-year planning. Management has developed a long-range financial and tax levy plan to ensure the village maintains healthy financial operations and reduces the structural imbalance caused by a decline in sales and income taxes. The village had recorded net operating deficits in the general fund for three of the past five audited fiscal years. However, the unassigned general fund balance has exceeded 35% of general fund expenditures since fiscal 2011, comfortably complying with a formal policy to maintain an unassigned general fund balance of at least 25% of general fund expenditures.

The fiscal 2015 budget assumed a $753,849 draw on general fund balance; however, based on year-to-date results management anticipates a $1 million surplus driven by expenditure reductions including savings through employee attrition. Revenues also performed better than budgeted estimates due to several large one-time sales tax transactions. Management intends to use the majority of the $1 million surplus to fund the village's long-term unfunded pension liability.

The proposed fiscal 2016 budget is balanced and represents a return to fully funding capital needs and other long-term liabilities. The budget is balanced with a planned 11.18% increase in the tax levy to avoid further use of general fund balance. Budgeted operating expenditures are flat; however, total general fund expenditures increase by 3.3% attributable to fully funding the Capital Equipment Reserve Fund (CERF) and Liability Insurance Fund contributions to fund workers compensation and general liability. In fiscal 2015 and 2014, management had deferred 50% of CERF Fund contributions for capital equipment replacements and reduced transfers to the Liability Insurance Fund to reduce operating deficits.

MANAGEABLE DEBT AND UNDERFUNDED PENSIONS

The village's overall debt burden is manageable at 6.2% of market value, or $4,075 per capita. Amortization is rapid with 72% of principal paid within 10 years. The village has two outstanding series of synthetically fixed-rate bonds representing a high 59% of outstanding GO debt. Fitch expects debt to remain moderate, as the village plans to fund future capital expenditures on a pay-as-you-go and grant-funded basis and does not contemplate any further GO borrowing at present. The village does plan to issue tax increment notes within the next several years to support economic development projects which will not represent a general obligation to the village but would be included in our calculation of the overall debt burden.

The village participates in two single-employer pension plans for Police and Fire, and the Illinois Municipal Retirement Fund (IMRF), the state's defined benefit agent multiple-employer retirement system. The village continues to fully fund the actuarially determined annual pension contribution for all three plans. The police, fire, and IMRF pension plans were collectively 67.5% funded at the end of fiscal 2014 or an even weaker estimated 64% funded ratio using Fitch's more conservative 7% discount rate versus 7.5% assumed by the plans.

The village pays the annual required contribution for OPEB, but has not established a trust. The village closed the OPEB plan in 1981 and currently has approximately 80 retirees receiving benefits. Carrying costs are moderate with debt service, pension ARC, and OPEB expenses representing 19.8% of governmental expenditures, although these may increase as the village increases pension funding to meet its target of being 100% funded by 2040.