S&P Final Report 2013 Purcellville

7/27/2019 S&P Final Report 2013 Purcellville

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Summary:

Purcellville Town, Virginia; GeneralObligation

Primary Credit Analyst:

Timothy W Barrett, New York (1) 212-438-6327; [email protected]

Secondary Contact:

Apple Lo, Boston (1) 617-530-8316; [email protected]

Table Of Contents

Rationale

Outlook

Related Criteria And Research

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT OCTOBER 7, 2013 1

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Summary:

Purcellville Town, Virginia; General Obligation

Credit Profile

US$27.295 mil GO rfdg bnds ser 2013 A due 02/01/2034

Long Term Rating AAA/Stable New

US$6.475 mil GO rfdg bnds (Federally Taxable) ser 2013 B due 02/01/2034

Long Term Rating AAA/Stable New

Purcellville Twn ISSUER CREDIT RATING due 09/15/2099

Long Term Rating AAA/Stable Upgraded

Rationale

Standard & Poor's Ratings Services raised its rating on Purcellville Town, Va.'s issuer credit rating (ICR) two notches to

'AAA' from 'AA' based on our recently released local general obligation (GO) criteria, published Sept. 12, 2013, on

RatingsDirect. The outlook is stable.

At the same time, Standard & Poor's assigned its 'AAA' rating and stable outlook to Purcellville's series 2013A and

2013B GO refunding bonds.

The town's full-faith-credit pledge and agreement to levy ad valorem property taxes without limitation as to rate or

amount secure the bonds. Officials intend to use series 2013A and 2013B bond proceeds to refund the town's

previously issued GO bonds.

The 'AAA' rating reflects our opinion of the following factors for the town, specifically its:

• Very strong economy that is deep and diverse with access to employment opportunities in the Washington

metropolitan statistical area (MSA);

• Very strong budgetary flexibility with fiscal 2012 audited available reserves at 39.1% of general fund expenditures;

• Strong budgetary performance with a diverse revenue stream, consisting of property taxes that account for 28% of

general fund revenue, followed by state aid at 12% and sales taxes at 11%;

• Very strong liquidity, providing very strong cash to cover debt service and expenditures;

• Very strong management conditions with "strong" financial management policies and practices under our Financial

Management Assessment (FMA) methodology, as well as historically consistent ability to maintain balanced

budgets; and

• Weak debt and contingent liability driven mostly by elevated net debt as a percent of revenue and elevated carrying

charges.

Very strong economy

We consider Purcellville's broad and diverse economy very strong since it benefits from its access to the entire

Washington MSA. Purcellville, with a population estimate of 7,829, is in western Loudoun County, about 60 miles

northwest of Washington. The town has experienced rapid population growth: The population has more than tripled


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over the past two decades; management expects population to continue to grow at, what we consider, a strong pace

due, in part, to the town's participation in the Washington MSA, as well as its access to Washington Dulles

International Airport. Purcellville is primarily residential (77% of the property tax base) with a growing commercial

property (23%) presence because a number of new businesses have located into the town over the past few years.

Town management has been proactively improving infrastructure and updating transportation with a number of local

transportation projects and sidewalk improvements. Purcellville, known as Washington's wine country, has 40 wineries

within minutes of the historic downtown area. County unemployment was, in our opinion, very low at just 4.5% in

June 2013.

Purcellville has, what we consider, strong per capita income. The town's projected per capita effective buying income

is 123.1% of the national level. Assessed value (AV) is currently $1.1 billion; in our opinion, AV has grown modestly

since fiscal 2010 by an average of 2.1% annually. Market value is $139,894 per capita in fiscal 2013.

Very strong budget flexibility

In our opinion, budget flexibility remains very strong. Over the past three fiscal years, according to Purcellville's formal

policy, the town has maintained an unassigned general fund balance equal to a minimum 30% of the general fund budget, or $3 million. Management expects to end fiscal 2013 with a $1.5 million surplus that increases general fund

balance to $7.3 million, or 80.8% of expenditures, and unassigned fund balance to $4 million, or 44.3%. In addition,

officials balanced the fiscal 2014 budget without using unassigned reserves. At fiscal year-end 2012, available reserves,

unassigned and assigned, were 39% of expenditures; we understand officials do not plan to spend down reserves.

Strong budgetary performance

We view overall budgetary performance as strong despite a sizable general fund reserve drawdown in fiscal 2012 for

planned one-time items and capital purposes. For fiscal 2013, based on unaudited results, management indicates real

estate and personal property taxes are 2.3% and 5.4%, respectively, overbudget. Other local revenue is above, what we

regard as, conservative budget estimates. Purcellville received approximately $1.2 million of one-time money for thesale of its former town hall. Officials used the $1.2 million to establish a $756,392 capital reserve fund and reimburse

the general fund for $503,308 of previous capital expenditures.

For fiscal 2014, Purcellville raised its real estate tax by 3.5 cents to fund parks-and-recreation-specific projects.

Excluding the dedicated 3.5 cents for parks and recreation, the operations tax remained 22.5 cents. Fiscal 2014

budgeted expenditures are 2.2% lower than the fiscal 2013 budget due primarily to a discretionary spending decrease.

The town also budgeted for a 14% local health insurance increase, an increase in the meal tax to 5% from 4%, a 2%

salary increase, and no other tax or fee increases. Officials balanced the budget without using unassigned reserves. We

understand that at fiscal year-end 2014, officials expect to maintain reserves well above the formal fund balance policy.

Purcellville ended fiscal 2012 by using $4.9 million of planned fund balance due primarily to one-time expenditures

and capital outlays from restricted funds, including a $4.6 million transfer into the capital projects fund from the

general fund. Revenue is diverse with property taxes generating 28% of general fund revenue, followed by state aid at

12% and sales taxes at 11%.


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Summary: Purcellville Town, Virginia; General Obligation



Very strong liquidity

What we consider very strong liquidity supports finances with a

total-governmental-available-cash-as-a-percent-of-total-governmental-fund-expenditures ratio of 136% and a

percent-of-debt-service ratio of 889%. We believe Purcellville has adequate access to external liquidity.

Very strong managementWe view Purcellville's management conditions as very strong with "strong" financial management practices under our

FMA methodology, indicating practices are strong, well embedded, and likely sustainable. The town maintains formal

investment and debt management policies and an adopted reserve policy that requires it to establish an unassigned

general fund balance at a minimum 30% of general fund revenue, or $3 million. In addition, management maintains

formal five-year, long-term financial forecasts and a formal five-year capital improvement plan (CIP). Management

reviews long-term financial and CIPs annually.

Weak debt and contingent liability profile

In our opinion, Purcellville's debt and contingent liabilities profile is weak with a

total-governmental-funds-debt-service-as-a-percent-of-total-governmental-funds-expenditures ratio of 15.3% and anet-direct-debt-as-a-percent-of-total-governmental-funds-revenue of 509%. Overall net debt, after adjusting for

self-supporting debt and overlapping debt, is 5.9% of market value. Following the refunding, we consider debt

amortization about average with officials planning to retire slightly more than half of debt over 10 years. The proposed

fiscal years 2014-2018 CIP is just $500,000.

Purcellville participates in the Virginia Retirement System (VRS); it contributed $405,985 to the VRS in fiscal 2012. The

town also contributes to an other postemployment benefits (OPEB) plan that it funds through pay-as-you-go financing.

Most recently, in fiscal 2012, the town contributed $12,200 toward the OPEB fund. As of Jan. 1, 2012, the most recent

valuation, the unfunded actuarial accrued liability was $1.7 million. The combined pension and OPEB contribution was

just 4.6% of governmental expenditures for fiscal 2012.

Adequate Institutional Framework

We consider the Institutional Framework score for Virginia towns, with a population greater than 3,200, very strong.

Outlook

The stable outlook reflects Standard & Poor's opinion of Purcellville's diverse and primarily residential property tax

base with very strong economic indicators and direct access to the greater Washington MSA's employment base. The

outlook also reflects our opinion of Purcellville's strong financial flexibility and strong operating performance. We

believe that management will likely maintain, what we consider, its strong financial f lexibility and performance andthat it will likely comply with its own comprehensive financial policies. As such, we do not expect to change the rating

within the outlook's two-year period.


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Related Criteria And Research

• USPF Criteria: Local Government GO Ratings Methodology And Assumptions, Sept. 12, 2013

• S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency, Sept. 12, 2013

•

Institutional Framework Overview: Virginia Local Governments

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com. All ratings

affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use

the Ratings search box located in the left column.


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S&P Final Report 2013 Purcellville

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