OREANDA-NEWS. Fitch Ratings takes the following rating action on the city of Newark, Delaware (the city):

--\\$10.1 million general obligation (GO) refunding bonds, series 2011 affirmed at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the city, for the payment of which the city has pledged its full faith and credit and unlimited taxing power.

KEY RATING DRIVERS

STRONG UNDERLYING ECONOMY: The economy is anchored by a significantly sized healthcare and higher education sector, and benefits from a highly educated labor force. Economic strengths contribute to healthy growth in city revenues and overall stable financial performance.

WELL-MANAGED LONG-TERM LIABILITIES: Use of pay-as-you-go capital spending has limited the city's reliance on debt. Fitch expects the city to continue to maintain a very manageable debt burden given moderate borrowing plans and rapid pay-down of outstanding bonds.

ENTERPRISE FUND DEPENDENCE: The city general government operations are largely supported by transfers from the utility funds, which have demonstrated fairly stable financial metrics and adequate liquidity.

RATING SENSITIVITIES

FINANCIAL PROFILE OF UTILITIES: Given the reliance on transfers for general fund operations, the continued strength of the utility funds is paramount to the maintenance of the current rating.

CREDIT PROFILE
The city of Newark is located in the northwestern part of the state of Delaware, approximately 25 miles southwest of Wilmington, DE and 45 miles southwest of Philadelphia, PA. The city's 2013 estimated population of 32,549 reflects a 3.5% increase since 2010.

ECONOMY ANCHORED BY HEALTHCARE AND EDUCATIONAL INSTITUTIONS
Newark's economy is anchored by a significantly sized healthcare and education sector. Christiana Care Health System, one of the largest private employers in Delaware, and the University of Delaware (UD), enrolling approximately 21,000 students at the Newark campus, are key employers.

UD continues to develop the 272-acre former Chrysler plant site into its science, technology and advanced research (STAR) campus which serves as a research, education and business hub. Currently, the STAR campus is home to UD's Health Sciences Complex, Bloom Energy, a fuel cell manufacturer, and UD's eV2g project, a vehicle to grid effort.

Major international firms in and around the city include E.I. DuPont de Nemours and Company and Dow Electric Materials. The local workforce is exceptionally well educated, which should serve the city well in its continued efforts to attract high-paying science and technology jobs. Median household income approximates the national median, although the poverty rate is high, which likely reflects the presence of a large student population. The city's unemployment rate is consistently lower than the state and nation. As of March 2015, the city unemployment rate was a low 3.5%.

SOLID FINANCIAL OPERATIONS BOLSTERED BY TRANSFERS FROM UTILITIES
City finances are significantly reliant on enterprise fund transfers. Utility transfers to the general fund totaled \\$12.7 million in fiscal 2014. This general fund revenue stream has been historically stable and represents a significant 46% of general fund revenue. Though atypical for local governments, the general fund's transfer dependence represents a thoughtful policy designed to keep taxes low and to spread the cost of government among residential and commercial taxpayers and tax-exempt entities, most notably UD, which occupies a significant portion of the city's total land area. UD is the principal electric utility customer, accounting for 39% of electric consumption.

Fiscal 2014 ended with a modest \\$159,000 (0.6% of spending) operating deficit, after transfers. The unrestricted balance was \\$4.2 million or a healthy 15.2% of spending and within the city's policy target. The city revised its financial policies in September 2014, and sets targets for each fund to meet operating, capital debt service and emergency needs. The city is expecting a small general fund operating surplus for fiscal 2015 and stable utility operations.

The city's enterprise funds include water, wastewater, electric and parking. The aggregate system has consistently generated very strong coverage ratios; overall coverage was 8x in fiscal 2014. Unrestricted cash and investments relative to operating revenue was an adequate 93 days or 19% of combined enterprise fund operating revenue. The city has prudently implemented gradual increases in real property taxes and utility rates to maintain financial stability.

MODERATE CARRYING COSTS
Total debt level is low (\\$1,369 per capita) and direct debt is extremely modest as the city has a history of funding capital needs on a pay-as-you-go basis. All city debt, including self-supporting GO debt, is repaid in a rapid 12 years, offering flexibility to fund future capital needs. Additional borrowing plans are moderate and should be manageable.

The bulk of the debt is serviced from the water enterprise fund, which provided coverage of 2.5x in fiscal 2014, after transfers. Debt service (net of water utility related GO debt service) was less than 1% of general government spending.

The city prudently funds the full actuarial required contribution (ARC) for other post-employment benefits (OPEB), totaling \\$1.2 million in fiscal 2014. The unfunded actuarial accrued liability at Jan. 1, 2013 was a moderate \\$9.6 million. The OPEB trust fund, valued at \\$4.2 million, was 30% funded.

The city's pension plan has a funded ratio of 71% as of Jan. 1, 2015. The unfunded actuarially accrued liability is a moderate \\$22.1 million. The city's pension plan is closed to new non-police employees, who participate in a defined contribution plan. Carrying costs (debt service, pension and OPEB) consumed a moderate 14.2% of general government spending in fiscal 2014.