Additionally, Fitch downgrades to 'AA-' from 'AA' its rating on the county's implied unlimited tax general obligation (ULTGO) pledge. The county has no ULTGO bonds.
The Rating Outlook is Stable.
LTGO bonds are secured by the levy of an ad valorem tax on all property within the 10-mill limitation.
KEY RATING DRIVERS
DOWNGRADE CONSIDERATIONS: Fitch's downgrade reflects reduced financial flexibility, concerns about the county's ability to consistently balance its budget, and signs of potential economic weakening. Further budget adjustments may be challenging given limited revenue-raising capacity and expenditure flexibility.
ECONOMIC WEAKENING: The area economy has an above-average representation in manufacturing and average- to below-average economic indicators. A notable decline in assessed value (AV) for 2013 as well as some local layoffs suggest some stall-out in the local recovery.
LOW DEBT & LONG-TERM LIABILITIES: The county's debt, pension, and OPEB costs do not cause budgetary pressure as carrying costs are low.
LTGO RATING ON PAR WITH IMPLIED ULTGO RATING: The LTGO bonds are rated on par with the implied ULTGO rating due to the still-sound level of financial flexibility as indicated by the county's healthy fund balance.
PORT AUTHORITY RATING: The one-notch differential between the ratings on the
SHIFTS IN CREDIT FUNDAMENTALS: The rating is sensitive to shifts in fundamental credit characteristics, especially in the county's financial and economic performance. Fitch expects that the financial operations will continue to experience volatility but reserves will remain sound.
REDUCED FINANCIAL FLEXIBILITY; JAIL WAS DRAIN IN 2012
County financial operations underperformed break-even expectations in 2012, with a large operating deficit of
The county's unrestricted fund balance was overstated in 2011 as advances to other funds were later reclassified as transfers out. If restated, Fitch estimates that 2011 unrestricted fund balance would have been a still-high
Management projects a small addition to fund balance in 2013 driven by sales tax, which was up 4.9% from the prior year and over budget. Fitch regards these results with some caution given variability in actual versus projected results in prior years. The year 2013 contained 3% pay raises for the first time in three years, offset by healthcare cost shifts to employees. Contracts call for further 3.5% and 2.25% pay increases in 2014 and 2015, respectively. The year 2013 was the first year that the county received constitutionally mandated state-wide casino revenues, which totaled
The 2014 budget conservatively contains a decrease in sales tax from 2013 actual. The county appropriated its full fund balance as is its practice, but anticipates using only
UNEXPECTED AV DECLINES; ABOVE-AVERAGE UNEMPLOYMENT
AV declined an unanticipated 7.3% in 2013. Home prices for 2014 are marginally up over the year prior according to Zillow, suggesting some stability in the local housing market. Wealth indicators are approximately average, though market value per capita is below average at
LONG-TERM LIABILTY PROFILE A CREDIT POSITIVE
Fitch believes that the very low cost of carry and low-to-moderate debt burden are credit strengths. The debt burden of
The county participates in state plans for pension and OPEB benefits. Aggregate general fund contributions for both benefit classes were at a moderate
PORT AUTHORITY BONDS BENEFIT FROM COUNTY-GUARANTEED REVENUE
The 'A+' rating on the port authority bonds reflects the county's commitment of non-tax revenues in an amount sufficient to pay debt service. Non-tax revenues have declined 28% since 2008, largely driven by significant weakening in interest revenue. Maximum annual debt service (MADS) as a percent of total non-tax revenues was still a small 0.7% in 2012. Revenues are diverse and constitute 31.1% of county general fund revenues in 2012, coming from fees, charges for services, fines, interest, and other revenues. There is a cash-funded debt service reserve fund, roughly twice the semiannual debt service payment, which Fitch believes would provide sufficient liquidity should there be delays in county remittances from the short 10-day period between notification by the trustee of any deficiencies and debt service payments.
The bonds are intended to be repaid from a 3% county lodging tax (from which the cities of
Coverage from lodging tax revenue has remained above 3.0x since 2008, dipping 10% in 2009 and having strongly recovered subsequently. Debt service is roughly level and MADS coverage in 2018 using 2009's low-point in revenues is a strong 3.0x. Funds not used for debt service are returned to the county for operations.
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
Most Popular Stories
- Doctor Who Christmas Episode Begins Production
- HCL America Adding 1,200 IT Jobs
- Medical Mfg. Jobs Coming to Dayton
- Longtime Unemployed to Get Help in Las Vegas
- Michael Jackson, Freddie Mercury on Previously Unreleased Queen Cut
- SpaceX Aims for Predawn Launch on Saturday
- Women Key to Democratic Party: Clinton
- U.S. Chamber Caught Up in Tax Inversion Question
- Feds Won't Say How Many Border Crossers Jailed
- Christie Didn't Order Bridge Shut Down, Feds Say