OREANDA-NEWS. March 23, 2016. Fitch Ratings has affirmed the following Westlake, OH's (the city) bonds:

--\\$9.8 million limited tax general obligation (LTGO) bonds at 'AAA';
--Implied unlimited tax general obligation (ULTGO) bonds at 'AAA'.

The Rating Outlook is Stable.

SECURITY

The LTGO bonds are secured by the levy of ad valorem taxes limited by rate to the 8.7 mills granted by the city's charter.

KEY RATING DRIVERS

WELL-MANAGED FINANCIAL OPERATIONS: The city has a history of strong solid management which has produced strong reserve and liquidity levels and ample financial flexibility.

RELIANCE ON INCOME TAXES: The city is reliant on economically sensitive income tax revenues which have reported strong growth over the last several years.

HEALTHY PROPERTY TAX BASE: The wealthy tax base is diverse. The residential property tax rate, which is among the lowest of nine surrounding communities, is comprised primarily of continuous levies which mitigate renewal risk.

AFFLUENT WELL-LOCATED COMMUNITY: The city benefits from its close proximity to Cleveland and exhibits strong economic indicators including above-average resident wealth levels, strong full value per capita, and below-average unemployment.

WEAKENED DEBT PROFILE: Modest future borrowing plans and strong financial operations will facilitate the city's management of its above-average debt burden.

IMPLIED ULTGO RATED ON PAR: Fitch makes no rating distinction at this time between the LTGO rating and the implied ULTGO rating in light of the financial flexibility offered by the city's high reserve levels.

RATING SENSITIVITIES

CONTINGENT LIABILITY: The city could face general fund pressure if there is a material increase in future debt.

STRONG FISCAL MANAGEMENT: Maintenance of the strong fiscal management and budgeting practices underscore the city's solid financial profile. Fitch expects management will continue prudent financial practices to maintain its strong reserve levels.

CREDIT PROFILE

The city is situated in Cuyahoga County in northeastern Ohio, approximately 13 miles west of Cleveland, 15 minutes from the airport, and in close proximity to three interstates, making it a desirable location for businesses.

WELL-MANAGED FINANCIAL OPERATIONS PRODUCE STRONG RESERVES

General fund revenues are fairly diverse with income taxes the primary source at 49% followed by property taxes at approximately 29%. Income tax revenue growth has been strong, increasing by 13% from 2012 to 2014. City officials indicate collections grew at a similar pace during the past year and anticipate accelerated growth once American Greetings opens this summer. Fitch views these projections as reasonable.

The city levies a 1.5% income tax. Of the 1.5%, one percent is unvoted and used for general operations; 3/8th of one percent is voted through 2022 and dedicated to the infrastructure capital projects fund; and 1/8th of one percent is voted and dedicated to operations and maintenance of the recreation program and center. The 1/8th levy will expire in 2020, the last year for debt service on recreation bonds issued in 2008. Two years later, the 3/8th levy will expire. If residents work in a locality that has a municipal income tax, the city provides a 100% tax credit. The city has some flexibility to increase revenues through higher fees and reduction in the 100% income tax credit.

Despite a slight contraction from the recession, the city's property tax base remains solid, generating an above-average full value per capita of \\$119,000. The tax base is diverse with the top 10 property taxpayers comprising 8.4% of assessed value and total property tax collections are healthy averaging 97.5% over the past three years. Fitch anticipates that planned expansions to the mixed-use Crocker Park will ensure continued healthy tax base growth.

The city's property tax rate is relatively low - in 2016 Westlake has the 7th lowest residential and 6th lowest commercial property tax rate out of 80 districts within Cuyahoga County. The property tax rate consists primarily of continuous levies, which Fitch views positively as there is no renewal risk. City residents recently renewed by a high margin the one levy that requires renewal, the 0.90 mill supplement for police and fire. Fitch notes that the city is at its charter tax limit and would need a voter referendum to increase property tax revenues, but takes comfort in the fact that the city has a strong history of voter support for new and renewal levies.

Financial operations are well maintained, preserving ample reserves which provide comfortable margins for liquidity. The city has traditionally maintained large balances in its general fund, well in excess of the policy minimum of 3 months of operating expenses. For year-end Dec. 31, 2014, the city recorded a general fund operating surplus of \\$3.7 million after transfers, equal to a healthy 12.3% of spending. The unrestricted equalled a very strong 149.6% of general fund spending.

Preliminary 2015 results indicate on a cash basis favorable revenue and expenditure variances to budget, at \\$2 million and \\$6 million, respectively. Keeping with conservative budget and practices, the 2016 general fund budget projects a \\$13.2 million use of fund balance. Historically, the city rarely draws down fund balance to the extent budgeted.

STRONG ECONOMIC CHARACTERISTICS

With a modest 2015 population of 32,471, an increase of 2.4% from 2000, Westlake is home to an affluent population, with wealth levels exceeding state and national averages. World and national headquarters located in the city include Nordson, Travel Centers of America, and Koyo Corporation. City unemployment rates have historically been well below state and national rates. For December 2015, the city reported an unemployment rate of 3.1%, compared to state and U.S. rates of 5.7% and 5.2%, respectively. Major employers include St. John Medical Center (1,526 employees), Hyland Software (1,458) and Westlake City Schools (670).

American Greetings (AG; not rated by Fitch) will move its corporate headquarters 12 miles from its current Brooklyn, Ohio location to Crocker Park in Westlake. AG will acquire approximately 14.5 acres from the developer and construct the AG headquarters and certain retail space on the AG land.

WEAKENED DEBT PROFILE

Debt ratios increased recently, reversing the historically moderate trends. Overall debt per capita equals \\$7,959 and debt-to-full value is 6.7%. Amortization is a below-average 27% in 10 years. Carrying costs for debt service, pension and OPEB equals a still moderate 11.1% of government spending. Minimal future debt issuance and strong financial operations somewhat mitigate Fitch's concern over the higher debt levels.

The high debt burden and slow amortization incorporate a 2014 city issuance of special obligation bonds to finance the cost of public improvements associated with the relocation of AG. The city expects TIF revenues will pay the associated debt service, although the bonds are also payable by the city's non-tax revenues. Fitch believes that if necessary, the city could absorb the increased debt service costs without compromising its strong financial profile.

LONG-TERM LIABILITIES

The city provides pension benefits through state administered plans and funds 100% of its required contributions. The largest state retirement fund, OPERS, reported a 83.8% funded ratio as of Dec. 31, 2014, and is above the estimated 75.5%, using Fitch's more conservative 7% rate of return assumption. State-mandated changes in employee contributions to OPERS should help improve the system's funded ratios.