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Summary:Chelmsford, Massachusetts; GeneralObligationPrimary Credit Analyst:Andrew R Teras, Boston (1) 617-530-8315; andrew...
Summary:Chelmsford, Massachusetts; General Obligation Credit Profile US$5.292 mil GO mun purp loan bnds ser 2013 dtd 02/01...
Summary: Chelmsford, Massachusetts; General Obligationoperating surplus of $3 million (2.6% of budget) in fiscal 2012, the...
Summary: Chelmsford, Massachusetts; General ObligationOutlookThe outlook is stable. The rating could be raised if there is...
Copyright © 2013 by Standard & Poors Financial Services LLC. All rights reserved.No content (including ratings, credit-rel...
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Chelmsford Massachusetts Standard & Poors Credit Ratings Report 2013


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Chelmsford Massachusetts Standard & Poors Credit Ratings Report

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Chelmsford Massachusetts Standard & Poors Credit Ratings Report 2013

  1. 1. Summary:Chelmsford, Massachusetts; GeneralObligationPrimary Credit Analyst:Andrew R Teras, Boston (1) 617-530-8315; andrew_teras@standardandpoors.comSecondary Contact:Victor M Medeiros, Boston (1) 617-530-8305; victor_medeiros@standardandpoors.comTable Of ContentsRationaleOutlookRelated Criteria And ResearchWWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 1, 2013 1 1106947 | 300171391
  2. 2. Summary:Chelmsford, Massachusetts; General Obligation Credit Profile US$5.292 mil GO mun purp loan bnds ser 2013 dtd 02/01/2013 due 04/15/2024 Long Term Rating AA/Stable NewRationaleStandard & Poors Ratings Services assigned its AA long-terms rating to Chelmsford, Mass. general obligation (GO)municipal purpose loan of 2013 bonds. At the same time, we affirmed the AA long-term rating and underlying rating(SPUR) rating on the towns existing GO debt.The rating factors include the towns:• Participation in the Boston metropolitan area economy, coupled with above-average wealth and income indicators and low unemployment relative to commonwealth and national averages;• Recent record of favorable financial performance and maintenance of strong reserves;• Strong financial management practices; and• Low debt burden with rapid principal amortization.Somewhat offsetting the above factors are the towns sizable pension and other postemployment benefit (OPEB)liabilities that, despite recent efforts to address these costs, could pressure the budget if no further action is taken.Officials plan to use 2013 bond proceeds to finance portions of the towns fiscal 2013 capital program and to advancerefund the series 2004 GO bonds. The refunding portion of the issuance will be exempt from the levy limitations ofProposition 2 1/2. The new-money portion will not be exempt.Chelmsford, with an estimated population of 34,000, borders Lowell, about 24 miles north of Boston. Interstate 495and various state routes serve the town, making it a prime area for many commuters employed in easternMassachusetts and southern New Hampshire. Although Chelmsford is primarily residential, the town does maintain acommercial and industrial employment base. Leading private employers include United Parcel Service of America Inc.(1,510 employees), Kronos (1,160), Natures Jewelry/Potpourri Group (500), Comcast (500), and Mercury Computer(440). Unemployment has been consistently below commonwealth and national rates and was estimated at 5.6%(seasonally unadjusted) for December 2012. Median household and per capita effective buying income are strong at151% and 142%, respectively, of the national levels.Following several years of strong assessed valuation (AV) growth, the real estate market slump and decreasing homeprices contributed to a 16.5% decrease in the towns AV since fiscal 2007. However, the 2013 value of $4.5 billion is adrop of less than 1% from 2012, indicating signs of stabilization. Furthermore, value per capita remains strong at$130,000. The tax base is diverse, with the 10 leading taxpayers accounting for less than 4% of total AV.Chelmsford continues to achieve a favorable operating performance and growth in reserves. The town reported a netWWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 1, 2013 2 1106947 | 300171391
  3. 3. Summary: Chelmsford, Massachusetts; General Obligationoperating surplus of $3 million (2.6% of budget) in fiscal 2012, the fourth surplus in the past five audited years.However, this does include the receipt of one-time revenues that were not budgeted, including $325,000 of FederalEmergency Management Agency reimbursements and $270,000 from a one-time property sale. At fiscal year-end,available fund balance (committed, assigned, and unassigned) was $13.1 million, or 11.3% of expenditures, a level weconsider strong and above the towns policy target range of 5% to 10%. The towns committed fund balance includesits stabilization reserves, totaling $7.7 million. General fund liquidity is sufficient, with the $15.5 million of cash andinvestments reported on the general fund balance sheet equal to nearly 50 days expenses.The fiscal 2013 budget (including sewer enterprises) of $111.6 million is a 3.2% increase over the adjusted 2012 budget(reflecting adjustments made at the October 2012 town meeting) and includes a tax levy increase within the limitationsof proposition 2 ½. The town has an unused levy capacity is $1.1 million and there is no use of reserves to balance thebudget. Property taxes are the main source of revenue, comprising about 75% of 2013 budget operating revenues.Officials report favorable budget-to-actual variances as of March 2013 and expect to end the year with another surplus.Standard & Poors considers Chelmsfords financial management practices "strong" under its Financial ManagementAssessment methodology, indicating financial practices are well-embedded and likely sustainable. Managementpractices include multiyear budget forecasting, monthly reporting of revenue and expenditure performance to the townmanager and board of selectmen, and formal debt management and reserve policies.Net of debt supported by sewer betterment revenues, the overall direct debt burden is low, in our view, at $2,000 percapita and 1.6% of market value. We consider amortization of debt rapid as the town projects 76% of principal will beretired over 10 years, following the issuance of the 2013 bonds. Roughly one-third of the towns debt is exempt fromthe levy limitations of proposition 2 ½. Debt service carrying charges are moderate, having averaged about 10% ofnoncapital outlay governmental expenditures over the past five audited fiscal years. We expect these charges toremain moderate after the upcoming issuance. Further, just over one-third of the towns GO debt is supported bysewer betterment revenues, mitigating the need to cover a significant portion of debt service with property taxes.Chelmsford recently completed a significant expansion of its sewer system and a new fire station and has no majorcapital needs for the next five years. However, we understand the town is considering an $18 million bond issue tofinance an energy savings program and an additional $3 million of debt for general capital improvements. Given thetowns rapid principal amortization and manageable annual debt service costs relative to its budget, we do not expectthese issuances to materially increase the towns debt burden.The town participates in the contributory retirement system of Middlesex County and makes 100% of the annualrequired contribution. Chelmsford subsidizes retiree health care benefits and contributes to its OPEB liability on apay-as-you-go basis. We understand that, in conjunction with labor agreements, the town has made modifications tohealth benefits that management reports has provided annual operating savings and expects will result in a reducedOPEB liability when the next actuarial valuation is completed this summer. In addition, the town has set up an OPEBtrust fund, which we understand has a current balance of $1.3 million. The most recent estimate of the townscombined unfunded pension and OPEB liabilities is a sizable $238 million, equating to 5.3% of property valuation and$6,900 per capita.WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 1, 2013 3 1106947 | 300171391
  4. 4. Summary: Chelmsford, Massachusetts; General ObligationOutlookThe outlook is stable. The rating could be raised if there is a continuation of operating surpluses, a large increase inreserves, a return to tax base growth, and a significant reduction in the towns long-term liabilities. The rating could belowered if the towns financial position deteriorates or if long-term liabilities continue to grow to the point of strainingthe annual operating budget. However, we believe the rating will remain stable in the next two years as we expect thetown to maintain reserves at or near the current level while pension and OPEB liabilities remain sizable, yetmanageable, within the constraints of the operating budget.Related Criteria And ResearchUSPF Criteria: GO Debt, Oct. 12, 2006 Ratings Detail (As Of April 1, 2013) Chelmsford Twn GO Long Term Rating AA/Stable Affirmed Chelmsford Twn GO Unenhanced Rating AA(SPUR)/Stable Affirmed Chelmsford Twn GO (CIFG) Unenhanced Rating AA(SPUR)/Stable Affirmed Many issues are enhanced by bond insurance.Complete ratings information is available to subscribers of RatingsDirect at All ratingsaffected by this rating action can be found on Standard & Poors public Web site at Usethe Ratings search box located in the left column.WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 1, 2013 4 1106947 | 300171391
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