The bonds are expected to sell via competition the week of
Simultaneously, Fitch downgrades approximately
The Rating Outlook is revised to Stable from Negative.
The current offering and all bonds issued after 2011 are general obligations of the county for which the county has pledged its full faith and credit and ad valorem tax, subject to the 2011 state statute limiting property tax increases to the lesser of 2% or an inflation factor (the tax cap law). This limit can be overridden annually by a 60% vote of the county's governing body.
The county has pledged its full faith and credit and unlimited taxing power for debt service on outstanding GO bonds issued prior to 2011. No exemption is made under the tax cap law for debt service on outstanding GO debt; however, the constitutionality of this provision has not been tested.
KEY RATING DRIVERS
DOWNGRADE CONSIDERATIONS: The 'BBB+' reflects the county's constrained financial flexibility reflected in thin reserves, revenue limitations, and a relatively inflexible expenditure budget. A trend in negative operating performance, though of relatively small magnitude, is concerning given the county's limited cushion.
UPSTATE ECONOMIC CENTER: The county's economy has experienced substantial diversification away from its historically manufacturing-based roots into health, higher education, and services. Long-term population loss appears to have abated since 2000.
ADEQUATE MANAGERIAL PRACTICES: Management's financial planning and review tools have helped contain discretionary cost growth.
MODERATE LONG-TERM LIABILITIES: The county's credit profile benefits from a moderate debt burden and rapid amortization as well as low pension and other post-employment benefit (OPEB) costs.
TAX LEVY LIMIT: All GO bonds are rated on parity despite the state-imposed tax levy limit because the county may exceed the tax cap in any one year with 60% approval of the county legislature.
FINANCIAL PERFORMANCE: The rating and Stable Outlook assumes some degree of variability in the county's financial performance; however, an inability to continue to control budget imbalances and/or evidence of outsized deficits may result in additional negative rating action.
HIGHLY CONSTRAINED FINANCIAL FLEXIBILITY
County operations are constrained with thin margins. The county drew down fund balance in both fiscals 2012 and 2013. Operating deficits after transfers were marginal but of a heightened concern given such a thin base. Fitch believes that over the long run, the county will be challenged to increase its financial flexibility materially above its current cushion.
The unrestricted general fund balance at the close of 2013 was an extremely weak
The 2014 budget was balanced without use of fund balance; however, the county is now projecting an operating deficit of
Fitch views as a credit positive the county's proven efforts to reduce its reliance on one-time revenue sources. The budget includes
PROJECTED BUDGET DEFICITS
The county continues to project out-year, albeit reduced, budget gaps that Fitch believes are likely to materialize at least in part. The county's multi-year budget forecast anticipates a combined
The 2015-2016 gaps are not significantly out-sized relative to the budget, equivalent to 2.7% and 3.9% of spending, respectively. Concern exists nonetheless based on county's already thin fund balance position, and aforementioned budgetary challenges.
REVENUES DIVERSE BUT EXHIBITING MODEST GROWTH
The county's revenues are derived from diverse sources including sales tax (35% of 2013 general fund revenue), state and federal aid (27%), and property tax (28%). However, a majority of the sales tax is a pass-through to underlying municipalities and school districts. Additionally, Fitch anticipates that growth in property tax revenue will rely on tax base increases because of management's commitment to a static tax rate; the rate remains unchanged since 2008. Revenues increased a modest 0.3% in 2012 and 0.8% in 2013.
LIQUIDITY REMAINS DEPENDENT ON BORROWING
The county's available general fund liquidity levels remain low in 2013 (with the majority of the
LOW FIXED-COST BURDEN
The county's debt profile is generally a credit positive, with moderate overall net debt per capita of
The county's six-year capital improvement plan contemplates approximately
The county participates in state-run cost-sharing defined benefit pension plans which are well-funded at 87% as of
The county funds its OPEB liability on a pay-as-you-go basis. OPEB together with debt service and pension payments account for a low 8.1% of governmental fund spending and would have remained affordable at 10.4% if the county had fully funded its OPEB ARC. The county's OPEB liability is somewhat high, approaching nearly
Other leading employers include
County unemployment is down to 5.3% in
The county's long-run population out-migration trend appears to have moderated and shows early signs of reversal, with marginal population growth of 1.9% since 2000, to 749,800 in 2012. The county's housing market did not experience a boom or bust through the past business cycle, resulting in continued assessed valuation growth at a moderate pace, up 12.8% since 2008 and a modest 1% for 2014. Positively, median home sales priced for Q1 2014 was up 2.4% from the same quarter year prior.
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,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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