Fitch Ratings assigns an 'AA' rating to the following general obligation (GO) bonds of --
The proceeds of the 2014 series (tax-exempt) bonds will be used to finance school renovations and additions as well as improvements to the county's water and wastewater systems. The bonds will be offered by the county at a competitive sale on
In addition, Fitch affirms the following ratings:
The Rating Outlook is Stable.
The bonds are general obligations of the county for which its full faith and unlimited taxing power are pledged.
KEY RATING DRIVERS
SEASONAL TOURISM-BASED ECONOMY: The tourism sector remains a significant economic driver, vulnerable to economic cycles and contributing to seasonal employment fluctuations. Despite its tourism dependence, the county's economy has historically demonstrated resilience during periods of economic stress.
HISTORICALLY STRONG FISCAL MANAGEMENT: Prudent management decisions and adherence to fiscal policies has yielded solid reserve levels despite revenue declines experienced in recent years. The county also maintains a high level of revenue flexibility.
LOW DEBT BURDEN: The county's debt burden is expected to remain low to moderate, given its manageable capital needs.
CARRYING COSTS ARE LOW: Carrying costs including debt service, pension and other post-employment benefits (OPEB) are low but expected to increase modestly as the county issues additional debt and the state shifts a portion of the burden of teacher pension costs to the counties.
The rating is sensitive to shifts in fundamental credit characteristics including the county's stable tourism- based economy and strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are highly unlikely.
FAVORABLE OPERATIONS DESPITE CHALLENGING REVENUE ENVIRONMENT
Financial operations are characterized by prudent budgetary management, maintenance of sound reserves, compliance with formal reserve policy, and comprehensive long-range planning.
Property taxes are the main revenue source, representing 70 percent of the total. Revenue performance has been strained over the last five years, declining an average of 1.8 percent per year due to taxable assessed valuation (TAV) reductions. The county has prudently cut spending at a faster pace (3.2 percent per year on average) to maintain robust reserves. Expectations for fiscal 2015 TAV are for a slight decrease with positive growth resuming in fiscal 2016 which Fitch believes is reasonable given the recent fluctuations in housing values.
The fiscal 2013 unrestricted fund balance improved to
The fiscal 2014 budget was adopted with a modest
SIGNIFICANT REMAINING REVENUE CAPACITY
The county's property tax rate is the second lowest in the state at
TOURISM-DRIVEN LOCAL ECONOMY
Tourism and hospitality is the leading employment sector at 37 percent. Top employers include several hotel and restaurant establishments including the
The county's population continues to grow, with 11 percent growth in full-time residents between 2000 and 2010 and flat growth since 2010. The population also continues to age, which puts less strain on education spending, the county's largest expenditure (46 percent). The county's wealth metrics are mixed, as evidenced by a county median household income at 109 percent of the national average but 79 percent of the state's high average. However, additional wealth flows into the county during the summer months from tourists and second-home-owners.
FAVORABLE DEBT PROFILE
Overall debt levels are moderate at roughly
The county's fiscal years 2014-2018 capital improvement plan totals just
MODEST PENSION AND OPEB COSTS
Long-term liabilities related to employment benefits are not expected to pressure future operations. The county provides pension benefits to its employees through the State of Maryland Employees Retirement and Pension System.
State pension funding levels have deteriorated to 59 percent using Fitch's 7 percent return assumption, although the state has undertaken extensive pension and OPEB reforms. The county contributes 100 percent of the state required payment but annual contributions are likely to increase as the state plan is only funding 67 percent of the actuarially required contribution. The county's current payment accounts for 4.3 percent of total governmental fund spending.
A portion of teachers' pension costs were shifted from the state to local governments starting in fiscal 2013 and will be phased-in over four years. The state is expected to offset the majority of the costs with increases in various revenue streams, such as income tax, indemnity mortgage recordation tax, and local income reserve relief. While the state has estimated the net cost to the county at
The county also provides OPEB to its retirees. During fiscal 2013, the county contributed
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Fitch Ratings assigns an 'AA' rating to the following general obligation (GO) bonds of