Fitch Rates Calvert County, Maryland's $18.5MM GOs 'AA+'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA+' rating to Calvert County, Maryland's estimated $18.5 million general obligation (GO) consolidated public improvement bonds, 2009 series. The bonds are scheduled to sell competitively on May 12, 2009 with proceeds funding a middle school renovation, an aquatic center project, and various transportation-related capital needs. In addition, Fitch affirms the 'AA+' rating on the county's approximately $107 million of outstanding GO bonds. The Rating Outlook is Stable.

The 'AA+' rating reflects Calvert County's strong financial operations guided by prudent fiscal management and debt policies as well as the county's low, rapidly retiring debt burden. The rating also incorporates the county's expanding but still limited economy. As planned, previously adopted growth management ordinances continue to slow the pace of residential development evidenced by a further decline in new residential building permits in fiscal 2008. Utilities account for roughly 10% of the county's total taxable assessed valuation (TAV), led by Constellation Energy Group Inc. and the Dominion Power Cove Point Liquefied Natural Gas Terminal. The local employment base is thin, with over 50% of residents commuting to jobs outside of the county limits.

Calvert County is located in southern Maryland along the western shore of the Chesapeake Bay. The population grew by 45% in the 1990s and was estimated at over 88,700 for 2008. Wealth levels in the county are above average compared to state and national levels, and have improved on a relative basis since 1999 estimates. Per capita money income in 2007 equaled 108% and 136% of state and national levels, respectively. Top employers include the county government and school system, Constellation Energy Group Inc., Calvert Memorial Hospital, and several large retailers. Unemployment rates have trended comfortably below state and national averages; the unemployment rate for March 2009 was 5.6%, compared to the state and national rates of 7% and 9%, respectively.

General fund reserve levels are strong and the liquidity position is sound. Fiscal 2008 ended with a general fund surplus of approximately $4.8 million, resulting in an unreserved fund balance of $55.6 million, or 28% of spending. By resolution, the unreserved, undesignated fund balance must equal at least 8% of the subsequent year's budgeted general fund expenditures, and the county's overall unreserved fund balance has exceeded this measure for at least the past five fiscal years. The financial strength of Calvert County is further demonstrated by the level of flexibility provided through pay-as-you-go capital funding, above-average retirement of principal, and the county's low property tax and income tax rates. Primarily due to declines in income tax receipts, recordation taxes, and highway user revenues in addition to one-time costs, the county projects total general fund revenues will close roughly $9.7 million below budget, lowering total fund balance to 26% of spending during fiscal 2009. The fiscal 2010 proposed budget trims pay-as-you-go spending for capital projects and while forecasted income tax growth of 1.7% may be vulnerable, the budget includes no layoffs, tax increases, or severe service reductions.

The Washington D.C. metropolitan area continues to struggle with the effects of the downturn in the real estate market. The region has seen significant increases in foreclosures, and declining home prices are projected over the next five years. The county itself has seen slight declines in home prices year-over-year. Fitch believes that important factors such as a triennial property assessment and a property tax revenue limit are likely to mitigate fiscal pressure from the real estate market over the longer term.

Debt levels are low and should remain so given strict growth management policies and the use of current resources to fund capital needs. Overall debt, including the debt of two underlying municipalities and water and sewer bonds, is equal to approximately $1,600 per capita and 1.2% of TAV; water and sewer bonds are not fully self-supported by user rates. Debt amortization, including this issue, is rapid with nearly 75% of principal retired within 10 years. The proposed six-year capital improvement plan through fiscal 2015 totals roughly $214 million, of which two-thirds will fund school needs and road improvement projects. County GO bonds and state grants, combined, account for nearly 90% of total capital financing sources.

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