Fitch Rates Bethel, CT 2006 GOs 'AA' & BANs 'F1+'; Outlook Stable.

NEW YORK -- Fitch Ratings assigns an 'AA' rating to the Town of Bethel, CT's $4,300,000 general obligation (GO) bonds, issue of 2006, and an 'F1+' rating to $15,223,000 GO bond anticipation notes (BANs). The bonds and the BANs will be sold via competitive bid on July 19. Bond proceeds will finance a portion of the Stony Hill Sewer project while BAN proceeds will be used to defease outstanding BANs issued for school capital projects and provide new money for various school, sewer, and general purpose capital projects. The bonds mature serially Aug. 1, 2007-2031 with semi-annual interest payments on Feb. 1 and Aug. 1, commencing Feb. 1, 2007. The Rating Outlook is Stable.

The 'AA' rating reflects Bethel's history of surplus operations supported by its small but resilient tax base, prudent fiscal management, moderate debt ratios, and affluent residents. Since the October 2002 revaluation, where the town recorded a notable 34.5% increase in taxable assessed value (TAV) effective in fiscal 2004, TAV has grown by 1.6% on an average annual basis. Improving tax collection rates and effective cost controls continue to produce budgetary performance exceeding prudent projections, boosting fund balance reserves and strengthening financial flexibility.

Located in southwestern CT in Fairfield County, Bethel is a community of 18,760 where many residents take advantage of commuter rail links to the employment centers of lower Fairfield County and New York City. Local job opportunities are available in the research, precision manufacturing, and service sectors. Economic activity is based in two industrial parks, as well as the active town center. Unemployment rates, which have risen through much of this decade, are beginning to decline and are consistently below regional, state, and national averages. Although per capita income levels in Bethel are below those of the county (one of the nation's wealthiest), they are on par with the state's high average and are well above national averages.

Bethel's financial operations exhibit consistency and resilience across economic cycles and recent declines in state aid. Budgets are developed conservatively, with appropriations for contingencies, regular pay-as-you-go funding, and prudent revenue forecasts leading to typically balanced operations. Fund balances levels remain solid consistent with an informal 10% reserve policy. The undesignated general fund balance for fiscal 2005 was $5.6 million, or 11.1% of expenditures and transfers out, up from $5.1 million or 10.7% for fiscal 2004. Preliminary results for fiscal 2006 indicate a slight fund balance drawdown due to increasing utility and fuel oil costs.

As a mature community, Bethel has very limited capital needs centered on infrastructure maintenance and school renovation projects. Future borrowing is expected to be modest, as approximately 50% of the five-year capital improvement plan is expected to be funded within the operating budget. The overall debt burden is moderate at $2,064 per capita and 1.37% of full property value. Debt amortization is rapid with 74.2% retired in 10 years.

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