NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns an 'AA-' rating to the city of Norwich, Connecticut's approximately $15.7 million of general obligation (GO) bonds, consisting of the following issues:

--$11.4 million GO bonds, series 2009A;

--$4.3 million GO refunding bonds, series 2009B.

The bonds are expected to sell competitively on Dec. 2, 2009. Proceeds of the series 2009A bonds will finance various capital projects in the city, and proceeds of the series 2009B bonds will refund, on a current basis, a portion of the city's outstanding series 2001A bonds. In addition, Fitch affirms the rating on Norwich's approximately $30.2 million of outstanding GO bonds at 'AA-'. The Rating Outlook is Stable.

The 'AA-' rating reflects Norwich's sound financial performance resulting from conservative budgeting practices and steady financial support provided by its full-service utility system. The city's stable economy exhibits good prospects for growth, but wealth indicators remain below average. A favorable debt profile and manageable capital needs are also rating factors. A key rating driver is the city's continued effort to expand its tax base, which should enhance its revenue-raising flexibility.

Located at the head of the Thames River in southeastern Connecticut, Norwich's local employment base is relatively diverse for a community of its size. A sizable share of economic activity is centered at the 400-acre Norwich Industrial Park (the park), which is home to nearly 50 companies and approximately 2,000 employees. Electric Boat, a division of General Dynamics (senior unsecured notes rated 'A' with a Stable Outlook by Fitch), recently leased space in the park to support its Virginia class submarine program. Per capita money income levels equal just 67.4% of the state's high average but are only slightly under the national average. The growth in income figures has not kept pace with the state and nation this decade, which may signal some underlying economic weakness. A healthy 27% increase in the tax base stemming from the Oct. 1, 2008 revaluation (effective fiscal 2010) has enabled the city to maintain a low tax burden. Several sizeable development projects in the planning stages could add to the city's tax base in the coming years, which would enhance its revenue-raising flexibility. However, recent economic conditions could complicate these plans.

The city's financial performance benefits from conservative budgeting practices that have resulted in balanced operations for most of this decade. Despite draws on reserves in fiscal years 2008 and 2009 - the city's only two this decade - the city continues to meet a policy requiring an unreserved general fund balance equal to 8% of spending. Declines in real estate-related revenues were offset with a hiring freeze to limit the extent of the operating deficit in fiscal 2009. The adopted fiscal 2010 general fund budget decreased by a considerable amount over the prior year's budget to $102 million, demonstrating the city's ability to curb expenditures in a challenging economic environment. The budget includes a reduction in employee numbers and no increase in the property tax levy, which will keep Norwich's tax burden among the lowest in the state. Per city charter, the Norwich Public Utilities Department (a full service utility system) makes an annual payment to the general fund equal to 10% of prior year gross revenues, providing a degree of property tax relief. This payment is budgeted for $7.2 million in fiscal 2010.

The city's limited bonding plans and a 1.0-mill annual allowance for pay-go capital per the city charter should keep debt ratios in low ranges; debt ratios currently equal approximately $1,100 per capita, or 1.5% of taxable market value. Carrying costs equal a modest 4.4% of fiscal 2010 budgeted spending, despite a rapid debt amortization rate of 78.7% within 10 years. The City of Norwich Retirement System was a sound 87.2% funded as of the July 1, 2007 valuation date, and the city's other post-employment benefits (OPEB) liability totals a manageable $47 million, including board of education employees. Officials intend to ramp up to full funding of the OPEB annual required contribution by fiscal 2014, which demonstrates sound long-term planning.

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

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