OREANDA-NEWS. Fitch Ratings has affirmed the 'AA+' implied general obligation (GO) rating for Maitland, FL (the city).

The Rating Outlook is Stable.

SECURITY

Implied ULTGO.

KEY RATING DRIVERS

IMPLIED GO BENEFITS FROM AMPLE FLEXIBILITY: The 'AA+' implied GO rating reflects the city's very strong financial position. Historically stable general fund operations have resulted in ample general fund reserves, providing the city with a very high level of financial flexibility.

STABLE, DIVERSE LOCAL ECONOMY: Above average socio-economic indicators combined with a significant commercial base provide stability and diversity within the local economy. The city's proximity to Orlando is also viewed favorably.

MANAGEABLE CARRYING COSTS, MODERATE DEBT BURDEN: Carrying costs including debt service, pension and other post-employment benefits (OPEB) are low. Direct debt levels are low with no debt issuance currently planned due to a history of proactively cash funding the capital improvement program; however, overlapping debt drives the total debt burden to a midrange level.

RATING SENSITIVITIES

HEALTHY RESERVES: The city's currently robust reserves temper the possible risks of unforeseen budget challenges and provide ample financial flexibility.

CREDIT PROFILE

Maitland is located in Orange County (implied ULTGO Rating 'AAA'/Stable Outlook) approximately 10 miles north of Orlando (implied ULTGO Rating 'AAA'/Stable Outlook) encompassing 6.5 square miles with a population of approximately 17,000.

SMALL BUT DIVERSE ECONOMY

Despite its small area, the city's commercial base is significant. Maitland is characterized by a dominant suburban office market for the region, which includes over 8 million square feet of office space employing approximately 23,000 people. The Maitland Center/Summit area is home to over 350 corporations including Clear Channel Communications, Digital Risk, and Fidelity Information Systems. The commercial mix also features a number of hotels and restaurants, Florida Hospital, and a sports and training facility affiliated with the NBA's Orlando Magic. Economic activity is also driven by the leisure and hospitality sectors, with education and healthcare providing some diversity.

ECONOMIC CONDITIONS IMPROVING

Employment data is not available from the Bureau of Labor Statistics due to the city's small population but the general economic turnaround is evident in the continued improvement in the county's unemployment rate to 4.2% in December 2015, reflecting a 3.8% increase in total employment in 2014. Maitland's wealth levels are very strong, with per capita money income and median household income 37% and 29% higher than the nation, respectively. City residents exhibit high educational attainment: 20% of residents hold an advanced degree, which is nearly 2 times the national standard.

The city's TAV was negatively impacted by the housing crisis, declining 23% between 2009 and 2013. Since then, TAV has increased 0.4%, 1.7% and 9.2% for fiscals 2014, 2015 and 2016, respectively. City management expects TAV growth to continue as a result of the rebound of the local housing market and new developments coming on line. Zillow.com is reporting year over year growth in their Zillow Home Value Index of approximately 8% to $298,700, still well short of Maitland's peak of $380,000 in June of 2006.

ROBUST GENERAL FUND OPERATIONS

The city has maintained strong general fund results, producing operating surpluses in all but one year from fiscal 2006 through 2014. Fiscal 2014 audited results included an operating surplus after transfers of $1.5 million (6.8% of spending). The unrestricted general fund balance totaled $17.4 million or a very strong 80% of spending.

Unaudited fiscal 2015 results show a surplus of $309,000, increasing the city's unrestricted general fund balance to $17.7 million or 78% of spending. The fiscal 2015 operating millage rate was increased for the first time in eight years to 4.15 (an increase of 7% over the prior year). Property tax revenues totaled $7.8 million, which was a 9.4% increase over prior year collections and the result of both the tax rate change and growth in the tax base city-wide. The tax rate remains below regional norms and well below the 10 mill statutory cap.

Similar to previous conservative budgets, the fiscal 2016 budget was operationally balanced. The budget does include with an additional appropriation of reserves of $2.4 million (9.3% of spending), primarily for one-time capital spending ($1.3 million) and an additional $250,000 pension contribution (beyond the actuarially required amount) to increase the funded ratio. Preliminary year-to-date results reportedly are on budget.

MODERATE DEBT PROFILE

The city's overall debt burden is moderate at $3,938 per capita and 2.7% of full market value, although debt levels are largely driven by overlapping debt of the county and school district. The city's 2016 - 2020 capital improvement plan is modest, with $6 million in general fund projects planned largely for a downtown revitalization project. Management will continue its practice of using pay-as-you-go capital financing and does not anticipate debt issuances in the near term. The city's public debt was fully refinanced with private bank notes in 2014. The amortization schedule remains fairly slow with 41% of the debt retired within 10 years.

LOW CARRYING COSTS

The city's primary pension expenditure is for police and fire retirees who are covered under a single employer defined benefit pension plan administered by the city. At the most recent actuarial valuation dated Oct. 1, 2014, the city's defined benefit plan is funded at 78%, or an estimated 72% using Fitch's 7% rate of return. The unfunded liability is very low at less than 0.5% of market value.

The city also participates in the Florida Retirement System (FRS), a statewide cost-sharing pension plan; benefits and contribution levels are determined by the state legislature. On an actuarial basis, FRS reported a July 1, 2015 funded ratio of 86.5%; this figure was 80.7% using a 7% return assumption (compared to the 7.65% assumption used by FRS); FRS has not yet released fiscal 2015 financial statements. The state legislature set employer contributions at the actuarial level in fiscal 2014 and 2015. The city's contribution in fiscal 2014 was $67,543 or just 0.26% of spending.

Other post-employment benefits (OPEB) are funded on a pay-as-you-go basis and provide an implicit rate subsidy to retirees hired after 1990. The unfunded accrued actuarial liability is a low 1.8% of market value. Total carrying costs including debt service, pensions, and OPEB were a manageable 14% of governmental spending in fiscal 2014.