15:49 | 24.08.2010
Fitch Rates Norton, Ohio LTGOs ‘A+’; Outlook Stable
Fitch Ratings has assigned the following ratings to Norton, Ohio’s (the
city) limited tax general obligation (LTGO) bonds:
–$2.6 million LTGO, series 2010A ‘A+’;
–$1.8 million LTGO, series 2010B ‘A+;
The bonds are scheduled to sell via negotiation on Aug. 25.
In addition, Fitch affirms the following rating:
–$2.4 million LTGO, series 2003 at ‘A+.
The Rating Outlook is Stable.
–Despite multiple years of fund balance draws, the city’s financial
flexibility remains adequate. Continued retrenchment of the local
automotive industry has resulted in a history of reduced income tax
–The local economy remains limited with high concentration in the auto
industry resulting in sustained regional employment losses and
above-average regional unemployment levels.
–Debt levels are low and expected to remain manageable given future
KEY RATING DRIVERS:
–Management’s ability to maintain adequate financial flexibility given
volatility in recurring revenues and ongoing spending pressures.
–Further regional economic dislocation driven by concentration of the
The bonds are the unvoted obligation of the city and payable from the
levy of an ad valorem tax on all property within the ten-mill limitation
imposed by Ohio Law. However, the city plans to pay the debt service for
series 2010 A with proceeds from its voted 3.0 mill fire levy and series
2010B through special assessments as it does for all of its water and
While the city has historically benefited from a diverse revenue base,
recent decreases in income tax receipts, which represent about
two-thirds of general fund revenues, have led to draws on reserves.
Fiscal 2009 (fiscal year end Dec. 31) marked the third consecutive year
of fund balance draws with unreserved fund balance at approximately
$572,000 or 9.3% of general fund spending, down from a high $1.8
million, or 40% of spending driven in 2006. Income tax receipts in 2009
declined by 8% from the year prior. Projected general fund cash results
for fiscal 2010 indicate an approximately $582,000 draw on reserves;
however, management expects balanced operations and no further draws in
fiscal 2011. While year-to-date income tax receipts have been better
than budgeted, Fitch expects some downward financial pressure to
continue as the city’s top employer and taxpayer (Fred Martin Motors)
continues to experience weak sales and the recent bankruptcy filing by
auto manufacturer, B&C Corporation, another major taxpayer and employer
for the city. Offsetting these pressures are the city’s sound management
practices which Fitch expects will help the city retain sufficient
reserve levels to provide adequate financial flexibility reflective of
its current rating level.
Other major sources of revenue include property taxes and state aid,
which also have experienced declines. Since fiscal 2006, property tax
revenues, which represent about 7% of fiscal 2009 revenues, have
declined by 4.4% annually primarily due to the state phase-out of
tangible personal property tax which ends in fiscal 2010. Although
overall assessed values have declined due to the phase-out, annual
residential assessed values (AV) growth has been modest equaling 1% for
fiscal years 2008 and 2009 and shows a minimal 0.5% increase in 2010.
State aid, which presents about 12% of fiscal 2009 revenues, has been
stable but remains vulnerable to state-level budget pressures.
Overall debt is low at 1.4% of market value, or $924 per capita.
Proceeds from this issue will permanently finance a portion of bond
anticipation notes issued for a new fire station and various water and
sewer improvements. Future capital needs are manageable.
The city is located in Summit County, 10 miles southwest of Akron.
Reflecting regional retrenchment of the automotive industry, employment
losses for the Akron area have outpaced the state and nation. June 2010
unemployment for the Akron area is above average at 10.3% compared to
national levels which equaled 9.6% but is slightly below the state’s
average of 10.4%.
Additional information is available at ‘www.fitchratings.com’.
In addition to the sources of information identified in the report
‘Tax-Supported Rating Criteria’, this action was additionally informed
by information from Creditscope, University Financial Associates,
LoanPerformance, Inc., IHS Global Insight, Stifel Nicolaus, and
‘Tax-Supported Rating Criteria’, dated Aug. 16, 2010
‘U.S. Local Government Tax-Supported Rating Criteria’, dated Dec 21, 2009
For information on Build America Bonds, visit ‘www.fitchratings.com/BABs’.
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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