NEW YORK--()--Fitch Ratings assigns an 'AA+' rating to the following Dane County, WI securities:
--$16,055,000 general obligation (GO) promissory notes, series 2012B;
--$9,330,000 GO corporate purpose bonds, series 2012C.
The current offerings will finance various capital improvements and land acquisitions. The bonds and notes are expected to price via competition the week of Sept. 17.
Additionally, Fitch affirms approximately $219 million in outstanding GO bonds and promissory notes at 'AA+'.
The Rating Outlook is Negative.
The county pledges its full faith and credit and unlimited taxing power for the repayment of principal and interest.
KEY RATING DRIVERS
OUTLOOK CONSIDERATIONS: The county's 2011 financial performance suggests that the county has restored structural budgetary balance. However, Fitch's maintenance of the Negative Rating Outlook reflects concerns around the county's ability to maintain adequate financial flexibility under recent more restrictive state law limiting revenue growth.
IMPROVED FINANCIAL POSITION: Operations in 2011 generated a surplus which eliminated the county's accumulated deficit and brought reserves to levels more consistent with the rating category.
FAVORABLE ECONOMIC PROFILE: The county benefits from above-average wealth levels, low unemployment, and a historically stable economic base centered on the state capital of Madison.
MANAGEABLE LONG-TERM LIABILITIES: The county's overall debt burden is moderate and is expected to decline due to limited capital plans and rapid debt retirement. Pension costs are manageable and should remain so, given state-wide changes in employee contributions. Other post-employment retirement benefit costs are minimal.
WHAT COULD TRIGGER A RATING ACTION
MAINTENANCE OF FINANCIAL FLEXIBILITY: Maintenance of the current rating is dependent on the county's ability to adapt to recent tax levy limitations and maintain structural balance and financial flexibility consistent with the 'AA+' rating.
STRONG, STABLE, DIVERSE ECONOMY
Dane County is home to the state capital of Madison and is the second most populous and third wealthiest county in Wisconsin. Per capita money income, which is negatively skewed by a large student population, is nonetheless above both the state (120%) and national (118%) averages. Residents are highly educated with 44% reporting attaining higher education as compared with the national average (27%). The county's population grew a healthy 12.6% between 2000 and 2010.
The economic base is diverse, anchored by government, education, healthcare, and insurance. Top employers are represented by the federal, state, and county governments; Madison Metropolitan School District; University of Wisconsin-affiliated healthcare and insurance providers; and Oscar Meyer Foods Corporation. The presence of such historically stable sectors has helped the county weather the recent economic contraction relatively well.
The county's unemployment rate remains relatively low at 5.4% in June 2012, well below the state (7.6%) and national (8.4%) averages. Taxable assessed valuation has contracted modestly over the past three years, most recently with a 0.6% drop in 2012. Fitch notes that tax base declines have been moderate and less than management's conservative projections.
FINANCES STABILIZE IN 2011
Based on 2011 operations, the county has addressed its structural imbalance after generating six years of general fund operating deficits after transfers. This poor performance culminated in a negative $1.7 million unreserved general fund balance in 2010 (negative 0.8% of spending).
The county reversed this negative unreserved fund balance position in 2011, finishing the year better than budget. The 2011 unrestricted general fund balance (sum of committed, assigned, and unassigned under GASB 54) totaled approximately $12.7 million or 6% of expenditures and transfers out. The positive fiscal results in 2011 were driven by strong sales tax growth, cost saving measures in the human services fund, and $7.2 million in non-recurring revenues (3.4% of 2011 spending) used to bolster fund balance. Additionally, the county more aggressively pursued tax delinquencies, which, combined with an improving economy represented an additional $1 million in revenue.
The 2012 budget is balanced and relies minimally ($745,000 or 0.3% of spending) on one-time revenue sources. The county is projecting a positive budget variance which Fitch believes is a reasonable projection given strong than budget sales tax performance as well as the realization of various cost savings measures.
Recent changes in the statewide property tax levy limitation further limits growth in the county's largest revenue source. Fitch views the county's implementation of multi-year budget forecasts as part of the 2013 budget process as an important tool in navigating this more restrictive revenue environment, and will continue to monitor the county's budget development and financial performance for the maintenance of financial flexibility adequate for this above-average rating level.
MANAGEABLE LONG-TERM LIABILITIES
The county's credit profile benefits from moderate overall debt, rapid amortization (84% retired in 10 years), and moderate future borrowing plans. Overall debt is moderate at $3,391 per capita and 3.4% of market value. Annual debt service equaled 8.9% of operating fund spending in 2011. Fitch believes that debt service will remain affordable, at or below the county's policy limit of 10% of general fund spending, because most of the county's major capital needs have been recently addressed and existing debt is rapidly amortized.
The county participates in a state-run defined benefit plan, which is well funded at nearly 100% as of its 2010 valuation. Operating fund payments for the plan are manageable at $15.5 million or 7.4% of 2012 budgeted general fund spending. Recent changes in pension funding are expected to increase the county's annual payment by an estimated $1 million, for which the county has prudently earmarked funds.
The county's other post-employment benefits are limited to an implicit rate subsidy, which represented 1.9% of budgeted general fund spending in 2012. The county's unfunded actuarially accrued liability is minimal at less than 0.1% of market value.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, and IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria