In the course of routine surveillance, Fitch Ratings affirms Marietta, Georgia's (the city) approximately $11.3 million general obligation (GO) bonds, series 2002 at 'AA'. The Rating Outlook is Stable.
The 'AA' rating is based on the city's strong, consistent financial results, stable and diverse economy, and low debt levels. Also factored into the rating are the city's poorly funded pension plan, which the city has taken recent steps to rectify, and its continued financial reliance on transfers from the combined utility system. The rating and Stable Outlook assume that over the next few years, the city will balance its long-term obligations, including its pension liability, while maintaining adequate financial flexibility.
Located 15 miles outside of Atlanta in northern Georgia, Marietta benefits from its location in the Atlanta MSA, as well as a diverse local economy, which has remained relatively stable during the current economic downturn. Major sectors of the local economy include health care, biotech, pharmaceuticals and manufacturing. Economic development continues in the city with a recent expansion by the city's largest employer, Wellstar Hospital. Unemployment has increased moderately over the past year to 9.2% in September 2009 from 6.3% a year prior. Wealth levels remain average.
Financial results have historically been strong and consistent with robust reserve levels. Unaudited fiscal 2009 results show a moderate drawdown bringing the unreserved general fund balance to a still healthy 28.3% of spending. The city continues to rely on transfers from its utility, the Board of Light and Water (BL&W), which accounts for over 22% of the general fund's total budgeted revenue for fiscal 2010. Transfers are allowed by city resolution to be increased annually at the rate of CPI growth and are not permitted to decrease. City council annually approves the transfer amount and has historically adjusted it every two or three years. The fiscal 2010 budget is balanced with no use of reserves. Through the first five months of the year, management reports being close to its on budget, which Fitch believes is reasonably conservative.
Debt levels are low with very rapid amortization although both are expected to soften slightly as a moderate amount of additional debt is issued. Plans for additional new debt are limited to $25 million in general obligation debt for parks later this calendar year. Capital needs remain manageable with the fiscal 2010-14 CIP totaling $96.1 million. The utility system accounts for over half of total need. The city's pension plan has been underfunded for the past few years, partially driven by city contributions of less than 100% of the ARC in fiscal 2006-2008. Beginning in fiscal 2008, the city began to restructure the plan in order to limit its liability and increase funding. Changes include extending the vesting period and implementing an employee contribution. The city also began to fund 100% of the ARC in fiscal 2009 and has budgeted to do so in fiscal 2010.
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