MOODY'S ASSIGNS A1 RATING TO NORFOLK'S $6.192 MILLION G.O. BONDS
A1 RATING AFFIRMED, AFFECTING $8.0 MILLION OF PREVIOUSLY ISSUED DEBT
Norfolk (Town of) MA
Municipality
Massachusetts
Moody's Rating: A1
Issue: General Obligation Bonds, Series 2003
Sale Amount $6,192,000
Expected Sale Date 01/08/03
Rating Description General Obligation Bonds
NEW YORK, January 2, 2003 -- Moody's Investors Service has assigned an A1
rating to the Town of Norfolk's $6.192 million General Obligation Bonds. At
this time, Moody's has affirmed the A1 rating on the town's $8.0 million of
previously issued parity debt. This issue will provide $3 million for library
construction which is secured by a general obligation, unlimited tax pledge,
as well as fund various other improvements secured by a limited tax pledge
given that debt service on the $3.192 million portion has not been exempted
from the levy limitations of Proposition 2 1/2. The A1 rating incorporates: a
generally stable financial position with an adequate level of financial
flexibility to address anticipated fiscal pressures; a primarily residential,
affluent base experiencing strong value appreciation and increasing new
growth revenues; a positive debt position even after incorporating school district
debt.
STABLE FINANCIAL POSITION EXPECTED TO BE MAINTAINED
Moody's anticipates the town's financial position will remain generally
stable, despite anticipated fiscal pressures, given a demonstrated ability
to maintain overall financial flexibility and a conservative budgetary
approach. The town's overall General Fund balance has averaged over 11% for the last
five years, with estimated FY02 year-end results inclusive of an unbudgeted
tax auction restoring fund balance to approximately 11.5% ($2.4 million).
For additional financial flexibility, the town maintains a growing
Stabilization Fund that at year-end 2002 stood at $726,000. Though Norfolk traditionally
levies right to the Proposition 2 1/2 growth levy limit, the town has
successfully passed operating overrides to provide additional revenue
raising flexibility which Moody's believes will be an important factor in future
financial stability given anticipated state aid reductions for next year.
Though the town is primarily reliant on property taxes to support
operations (62.5% of revenues), with a quarter of General Fund revenues derived from
the state, the town is exploring both cost-savings initiatives and revenue
enhancements to address these anticipated challenges. This includes seeking
authorization for another levy override in FY04 to, at a minimum, fund on a
recurring basis the FY03 use of free cash for operating purposes - this
represents a departure from management policy of allocating free cash only
for one-time expenditures. Despite the appropriation of reserves for FY03,
management believes conservative estimates of state aid funding for the
current year provide flexibility to replenish a substantial portion of
these reserves, thus adequately positioning the town to address anticipated
revenue and expenditure challenges for FY04.
STRONG GROWTH IN PRIMARILY RESIDENTIAL BASE
Moody's expects the town will continue to experience strong growth patterns
given the favorable location which has spurred both on-going development
and robust value appreciation. The town, located 20 miles southwest of Boston
(rated Aa2) and in close proximity to I-95 and I-495, is residential in
nature with 95% of ratables in this sector. Tax base growth averaging nearly 10%
annually over the last six year reflects consistent development that has
led to increasing new growth revenues ($373,000 in FY02 or 3% of the levy) and
market value appreciation. Indicative of this activity, the town has
already achieved budgeted levels of building permits for the current fiscal year.
This growth has led to a strong full value per capita of $93,770 and
above-average wealth indices (per capita income is 125% of the state), both of which are
skewed downward by the presence of a correctional facility in town.
Management anticipates new growth to remain fairly consistent as large multi-unit
residential construction and commercial development are planned.
FAVORABLE OVERALL DEBT POSITION
Moody's expects the town to maintain a positive debt position given
continued tax base growth, rapid debt retirement, and expected state building
assistance. Norfolk maintains a moderate debt burden of 1.7% when
incorporating the overlapping debt of the King Phillip Regional School
District. When accounting for the 67% SBAB reimbursement anticipated for
the town's locally-run K-6 school system, the debt burden is reduced to a more
modest 1.3%. The town has a minimal level of authorized unissued debt that
will be supported through General Fund operations, as the largest portion
reflects approximately $2 million for water improvements that will be
funded by the self-supporting enterprise system. An earlier $11 million
authorization for a municipal golf course has been rescinded. Debt service currently
accounts for 6.5% of General Fund expenditures and debt is retired rapidly
at 72% in ten years. The regional school district is currently undergoing a
$26 million middle school project (offset by 65% state grants) for which the
town is responsible for approximately 35% of the debt service. These costs have
been exempted from the levy limits. The district is also proceeding with
designs for a new high school facility which will be presented at Town
Meeting for debt exclusion as well.
KEY STATISTICS
2000 population: 10,460
2002 full valuation: $980.8 million (29% increase from 2000)
2002 full value per capita: $93,770
Overall debt burden: 1.7%
Adjusted overall debt burden: 1.3%
Payout of principal (10 years): 71.6%
FY01 General Fund balance: $1.856 million (9.5% of revenues)
FY02 Unaudited General Fund Balance: $2.408 million
ANALYSTS:
Jeffrey Kaufmann, Analyst, Public Finance Group, Moody's Investors Service
Jennifer Lewis, Backup Analyst, Public Finance Group, Moody's Investors Service
Yaffa Rattner, Senior Credit Officer, Public Finance Group, Moody's Investors Service
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