FITCH AFFIRMS BRISTOL, CT'S GO BOND RATING AT 'AA+'; OUTLOOK STABLE

Fitch Ratings--02 December 2014: Fitch Ratings has affirmed its outstanding ratings for Bristol, CT (the city) as follows:

--$74 million general obligation (GO) bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY The bonds are payable from the city's full faith and credit and unlimited taxing authority.

KEY RATING DRIVERS

HEALTHY FINANCIAL PROFILE: Prudent financial management is evidenced by a history of strong reserves, ample liquidity, and overall strong financial flexibility.

LOW LEVELS: Favorable debt ratios are not expected to materially change, due to manageable future debt needs, a history of paygo funding and a rapid par amortization rate.

STRONG MANAGEMENT OF OTHER LONG-TERM OBLIGATIONS: The city's pension systems have been significantly overfunded for several years and certain excess funds are being used to support other post-employment benefit (OPEB) costs. OPEB liabilities are manageable.

MIXED SOCIOECONOMIC INDICATORS: Wealth levels exceed national levels, but are below the high levels of the state. Unemployment remains above national averages but is in line with the state average. The city's economy is somewhat concentrated, as it is home to the headquarters of the Entertainment and Sports Programming Network (ESPN), the city's largest employer and taxpayer.

RATING SENSITIVITIES The rating is sensitive to changes in the city's economic base and financial profile. Continued strong reserves and further diversification in the economic base could strengthen credit quality.

CREDIT PROFILE

Bristol is a suburban city located 20 miles southwest of the state capital city of Hartford. The city's population has been relatively stable since 2000, with 2013 population of 60,568.

HEALTHY FINANCIAL PROFILE Similar to most towns and cities in the state, the city is highly dependent on property tax revenues (64% of fiscal 2013 general fund revenues), providing a predictable, stable revenue stream. Contributing to the city's strong financial position are prudent and conservative budgeting practices and the use of the ongoing surpluses for one-time expenditures or dedicated reserves. In fiscal 2013 the city prudently transferred $3.6 million to an equipment and building reserve, building those reserves to $5.7 million (2% of general fund spending).

The city ended fiscal 2013 with a $0.7 million operating surplus after the transfers. The unrestricted general fund balance was $30.1 million, or 15.5% of general fund spending, which Fitch considers strong given the absence of taxing limits and the predictability of revenues. In fiscal 2014 the city budgeted $0.5 million of reserves to balance operations. Projections indicate another general fund surplus of $.7 million after transfers which included $1.25 million to the equipment reserve and $0.25 million for prefunding fiscal 2016 OPEB expenses.

The fiscal 2015 budget of $185.1 million is a moderate 2.5% ($4.5 million) increase over the prior year approved budget, funded through increased property tax revenues generated from tax base growth and a 1.1 mil increase. Education accounts for almost 58% of general fund budgeted spending, and $2.6 million of the spending increase is for education. Notably, the city continues to decrease its reliance on balancing the budget with reserves. Budgeted use of general fund balance fell to $350,000 for fiscal 2015. This appropriation has declined each year from a once high $1.1 million in fiscal 2009. Management expects to gradually end this practice entirely.

ADDITIONS TO TAX BASE The city is the home to the headquarters of Walt Disney Company-owned ESPN. ESPN employs approximately 4,000 people and accounts for a significant 8% of the city's fiscal 2013 taxable assessed value. ESPN's has made sizable investments in highly specialized facilities and the cable network's high operating margins are expected to continue to make significant contributions to Disney's cash flow. In 2014 ESPN opened a new $100 million 193,000 square foot state-of-the- art media facility with six million feet of fiber optic cable. Fitch believes Disney's significant investment in this highly technologically advanced facility mitigates the risks associated with taxpayer concentration and considers ESPN to be an asset to Bristol's economy.

Other economic drivers in the city include its technology park and the presence of energy, manufacturing, and real estate industries. Bristol Hospital, Inc. is being acquired by Tenet Healthcare Corp., placing the formerly tax-exempt hospital on to the tax rolls. The hospital began an expansion in 2014 to add a new Wound Care Center. Developer financing on the 17 acre city-owned vacant lot for mixed-use construction is still in progress. This project, Renaissance Downtown would provide significant development in the city's downtown. Bristol is part of the Hartford metropolitan statistical area, which has about a third of the state's population.

Income and wealth indicators are stronger than national levels and the city's 11.3% poverty rate is well below the national rate of 15.9%. Median household income in 2013 was 85% and 111% of the state and nation, respectively. Unemployment as of September 2014 was 6.3%, which is down from 7.9% a year prior, due to strong 3.2% employment growth. Nationally, employment growth was 1.6%. The city's unemployment rate is slightly above the state and national rates.

LOW DEBT BURDEN Overall debt levels are low at $1,127 per capita and 1.2% of fiscal 2015 market value. Amortization of par is rapid at 76% in 10 years. Debt service as a percentage of fiscal 2013 government spending was an affordable 4.7%.

The city is planning to issue $30 million to $40 million in general obligation bonds in the spring of 2015; even with this issuance debt levels will remain low. The city is updating its capital improvement plan to finalize the sale amount. Given the low debt levels, rapid retirement and considerable paygo financing of capital needs, Fitch expects future debt issuances to be manageable and not materially change the debt profile after the spring 2015 issue.

RESPONSIBLE MANAGEMENT OF OTHER LONG-TERM LIABILITIES Total fiscal 2013 carrying costs for the city were a low 7.2% of government spending, reflecting prudent planning and affordable pension benefits. The city's employee pension systems remain over-funded. The city has not been required to make any contributions since fiscal 2007; employees contribute 6% of pay. Using Fitch's conservative 7% discount rate assumption, the city's pension systems, in aggregate, are estimated to be 153% funded as of July 1, 2012. The city is currently using excess funding monies to pay for fire and police employee OPEB costs in accordance with an IRS regulation that, according to management, allows for a formula-driven amount of excess funding over 125% that may be used to pay for OPEB costs.

The city's unfunded OPEB liability was $73 million at July 31, 2012, a low 1.3% of the market value of real property. The fiscal 2013 total OPEB contribution was $5.2 million, which represented 65% of the annual required contribution and a manageable 2.5% of general fund spending. The city's OPEB trust was funded with $3.4 million at fiscal year-end 2013.

Contact:

Primary Analyst Patricia McGuigan Director +1-212-908-0675 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004

Secondary Analyst Kevin Dolan Director +1-212-908-0538

Committee Chairperson Amy Laskey Managing Director +1 212-908-0568

Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: [email protected].

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, and National Association of Realtors.

Applicable Criteria and Related Research: --'Tax-Supported Rating Criteria' (Aug. 14, 2012); --'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research: U.S. Local Government Tax-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314 Tax-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

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