Fitch Ratings has affirmed its 'A+' rating to the Charter Township of Chesterfield (the township), Michigan's general obligation (GO) limited tax bonds. The bonds represent limited tax GOs of the township and constitute a first budget obligation. The Rating Outlook is Stable.
The 'A+' rating reflects the township's strong, conservative financial management reflected in high reserve levels, its proven willingness to reduce spending to preserve its financial flexibility, above average wealth levels, and low direct debt, although overall debt burden is above average. These considerations are tempered by projected taxable value deterioration resulting in potential property tax revenue declines, coupled with the township's economic susceptibility to the downturn automobile manufacturing industry.
Located along Interstate 94, roughly 20 miles north of downtown Detroit, Chesterfield benefits from a transportation network that provides easy access to the entire Detroit metropolitan area. The township's population has grown 19% since 2000, and currently stands at 44,612. Wealth levels are above average, as Chesterfield's 2007 median household income equaled 140% and 136% of the state and national averages, respectively. However, per capita income levels have declined marginally from 2000 to 2007 and may experience further pressure due to the region's current economic difficulties. Unemployment rates for Macomb County have spiked from 8.8% in 2008 to 18.6% as of July 2009 (not seasonally adjusted).
Due to the method in which taxable value is calculated in Michigan, recent precipitous declines in market value are expected to lead to decreases in taxable value in 2010 and 2011. Although this trend is expected to reverse itself by 2012, the drop in taxable value may cause fiscal imbalance and draw downs on available reserves.
The township has consistently maintained substantial financial reserves, providing the necessary cushion for the potential property tax and projected state-shared revenue declines. Ending general fund undesignated reserves totaled $6.0 million or 93% of spending in 2008 and balances have exceeded 80% of spending since 2000. Both police and fire are accounted for in separate special revenue funds and have dedicated millage attributable to each service. Combined general fund and special revenue funds ended 2008 with a $16.0 million undesignated balance or 86% of expenditures and transfers out, up from 74% of expenditures in 2006. The township's strong reserve levels and resulting financial flexibility are key drivers to preserving its credit rating.
Chesterfield's direct net debt burden is modest at $457 per capita or 0.5% of true value. The vast majority of the township's total debt burden is attributable to overlapping school district debt. Aggregate net debt totals a manageable $4,587 per capita or 5.5% of true value. Currently there are no plans to issue additional debt to finance capital projects for at least the next five years.
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Contacts:
Fitch Ratings, New York
Jessalynn Moro, +1-212-908-1608
James
Mann, +1-212-908-0500 ext. 5008
or
Cindy Stoller,
+1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com
