The bonds will sell competitively on
In addition, Fitch affirms the 'AA+' rating on the following bonds:
The Rating Outlook is Stable.
The bonds are secured by the full faith and credit of the county and an unlimited property tax levied on all taxable property within its jurisdiction.
KEY RATING DRIVERS
STRONG FINANCIAL POSITION: The 'AA+' rating reflects the county's strong financial position, supported by substantial reserves, consistently balanced operations, demonstrated revenue flexibility, and prudent management practices.
STABILIZING ECONOMY REMAINS CONCENTRATED:
TAX BASE TURNAROUND: Assessed values (AV) returned to growth in fiscal 2014 and 2015 following a substantial decline during the downturn, but remain well below pre-recession peaks.
MANAGEABLE LONG-TERM OBLIGATIONS: Debt levels are low due to the absence of overlapping jurisdictions and state government's responsibility for funding public education, while amortization is rapid. Liabilities for retiree benefits are mixed, with substantial pension liabilities offset by near-term plans to fully fund other post-employment benefits (OPEBs).
STRONG FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit strengths, including the county's healthy financial position and stabilizing economy. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely in the near-term. Upwards rating movement is constrained by significant concentration in the county's tourism-based economy.
The county serves a population of 160,000 (11% of the state total) on the islands of
STRONG FINANCIAL OPERATIONS
The county's financial operations remain strong and are distinguished by high reserve levels, consistently balanced operations, and revenue flexibility. Unrestricted fund balances reached a very high 63% of general fund spending (
The county achieved four consecutive years of strong operating results between fiscal 2010 and 2013 and appears likely to continue this positive trend in 2014. A deficit in fiscal 2012 resulted from the planned drawdown of reserves for one-time purposes. The county's fiscal 2015 budget is balanced and reflects continued prudent planning with further additions to reserves.
Property taxes accounted for a high 82% of general fund revenues in fiscal 2013 but the county has substantial ability to adjust rates to increase revenue and offset fluctuations in AV. The county's tax structure also provides for large homeowner exemptions and differential rates depending on property type, allowing the county to minimize the tax burden on residents. While AV fell a cumulative 25% between fiscal 2010 and 2013, the property tax levy fell by just 8% during the same period as the council approved recurring tax rate hikes. An additional rate hike in fiscal 2014 was followed by a reduction for fiscal 2015, as renewed AV growth supported increased tax revenues. AV increased by 3% in fiscal 2014 and 8% in fiscal 2015 but remains 16% below the fiscal 2010 peak.
Property tax rate increases have met minimal political opposition and are not subject to legal limits, so further revenue flexibility remains good. Transient accommodation tax (TAT) provides the county's second largest source of revenue (8% of general fund revenues in 2013) but growth is limited by recent state actions to cap allocations to counties.
STABILIZING ECONOMY REMAINS CONCENTRATED
Wealth levels for the county are above average with median household incomes 20% above national levels. The county's wealth is also reflected in real property market values of
Tourism remains the chief engine of the county's economy despite increasing diversification. Approximately one-third of county employment is in the leisure and hospitality sector. Resort and time-share properties account for five of the county's top ten employers and nine of its top ten taxpayers. Fitch considers this degree of concentration a material credit weakness despite the recent strong performance of the county's economy.
MANAGEABLE LONG-TERM OBLIGATIONS
Overlapping debt levels are very low at just
The six-year capital improvement plan (CIP) is sizeable at
The county is a participant in the state-sponsored employee retirement system and will likely face ongoing contribution rate increases to address a low funding ratio. The state plan reported a 60% funded ratio as of 2013 assuming an investment return rate of 7.75%, while Fitch estimates the funded ratio at just 55.4% assuming 7% returns. Contribution rates are set by statute and total contributions in recent years have fallen short of amounts required to amortize actuarially-determined liabilities.
The county's reported unfunded liability for OPEBs is substantial at
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope and Zillow.com.
--'U.S. Local Government Tax-Supported Rating Criteria' (
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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