Fitch Rates Fulton County, Georgia's $167MM GOs 'AA+'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings takes the following action on Fulton County, Georgia's (the county) general obligation (GO) bonds:

--$19.2 million GO library bonds, series 2010A, rated 'AA+';

--$147.8 million GO library bonds, series 2010B (Taxable - Build America Bonds), rated 'AA+'.

The series 2010A and 2010B GO bonds are scheduled for negotiated sale on Sept. 14, 2010. Proceeds will be used to finance the construction of multiple county libraries.

The Rating Outlook is Stable.

RATING RATIONALE:

--The county's 'AA+' rating is driven primarily by its low debt levels, rapid pay-out of existing debt and sound financial position.

--The presence of Atlanta anchors the county's economy and provides substantial employment opportunities from a diverse pool of large employers headquartered in the city.

--While financial management is generally strong, infrastructure needs are undefined as the county continues to operate without a long-term multi-year capital improvement plan.

KEY RATING DRIVERS:

--The county's ability to maintain its financial profile despite ongoing stress from the real estate market downturn and the continued challenge in gaining timely certification of the county's tax digest, which could both negatively impact the county's primary revenue stream.

--The county's partnership in the Fulton-Dekalb Hospital Authority, which is the parent organization of the Grady Health System (GHS, or the system), remains a concern given the system's tenuous financial position.

SECURITY:

The bonds are general obligations of the county secured by the county's full faith and credit and its ad valorem tax, without limitation as to rate or amount.

CREDIT SUMMARY:

Fulton County has a diverse economic base benefiting from Atlanta's role as the state capital and center of a broad regional economy. While the county's economy has shown signs of weakness amid the current economic downturn, Fitch believes long-term prospects are sound. The county's unemployment rate climbed to a high 10.8% in June 2010, though the figure remains only slightly above the Atlanta metropolitan statistical area (MSA) and the state. Population growth has outpaced the state's and the Atlanta MSA's, increasing nearly 27% since the 2000 census. The majority of the county is built-out with nearly one-fifth of the MSA's total population residing in Fulton County. On a per capita basis, county income levels are about 30% higher than the broader MSA and 40% higher than the state and nation. Median household income for the county also exceeds by a comfortable margin the MSA, state and nation.

Following two consecutive years of sizeable operating deficits, the county's general fund, based on unaudited results, ended fiscal 2009 with a healthy operating surplus of approximately $18.8 million. The positive results projected for fiscal 2009 increased the county's unreserved general fund balance to approximately $95 million, equal to about 19.5% of spending and transfers out. With property and sales tax revenue essentially flat relative to the prior year, the county eliminated nearly 500 positions in an effort to reduce operating expenditures in the general fund. Going forward, officials expect the county's reserves to remain in excess of its board-imposed policy of maintaining the unreserved general fund balance at or above 8.33%. The adopted fiscal 2010 budget was balanced with the use of approximately $27 million in general fund reserves, though year-to-date six-month operating results indicate positive variances with regard to general fund revenues and expenditures. The budget assumed no change in the current millage rate and a decline of approximately 14% in the tax digest. To offset the resulting 8% general fund revenue decline included in the adopted budget, the county is continuing with the elimination of staff and reduced the annual subsidy made to GHS following a debt restructuring that yielded an upfront debt service savings.

Following a sustained period of healthy growth, the county's tax digest declined in 2009 by about 6%, reflecting the ongoing housing market downturn. The county's reappraisal of its commercial properties coupled with a decline in residential home values resulted in widespread appeals in 2008 (fiscal 2009), which prevented the county's tax digest from being certified on time. County officials report significant progress in resolving outstanding appeals and have recently gained certification of the prior year's digest. Nonetheless, the current year's digest will also be late, but officials do not anticipate a protracted delay similar to recent years.

The county's continued practice of pay-as-you-go financing for capital projects and rapid debt amortization continues to keep debt levels exceptionally low. Overall debt, which includes the overlapping municipalities and various authorities, is slightly less than $1,400 on a per capita basis and exceeds by a small margin 1% of market value. Despite the low debt levels and favorable approach to capital funding, Fitch continues to have concerns about the lack of a long-term capital plan as the magnitude of capital needs remains uncertain. The current borrowing marks the county's first GO bond issuance since voters authorized in 2008 the issuance of up to $275 million in GO bonds. The size and timing of the county's next borrowing has not been determined to date.

Additional information is available at 'www.fitchratings.com'.

Related Research:

--'Tax-Supported Rating Criteria', dated Aug. 16, 2010.

--'U.S. Local Government Tax-Supported Rating Criteria', dated Dec. 21, 2009.

For information on Build America Bonds, visit www.fitchratings.com/BABs.

Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=492470

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