NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'AA+' rating on the following Iredell County (the county), North Carolina bonds:
--$35.1 million general obligation (GO) bonds at 'AA+'.
The Rating Outlook is Stable.
SECURITY
The GO bonds are secured by the full faith, credit and unlimited taxing power of the authority.
KEY RATING DRIVERS
SOUND FINANCIAL POSITION: Strong financial management and conservative budgeting have led to the maintenance of sound reserve levels, providing the county with ample financial flexibility.
MANUFACTURING CONCENTRATION: The county's economic base is heavily concentrated in manufacturing; however, a favorable location in close proximity to Charlotte promotes continued development and expansion. Unemployment levels continue to improve, and are now below the state average.
MANAGEABLE LONG-TERM LIABILITIES: The overall debt burden is expected to increase but remain at low to moderate levels due to sizable capital needs but rapid amortization of existing debt. Pension and other post-employment obligations (OPEB) do not pressure the rating.
RATING SENSITIVITIES
The rating is sensitive to shifts in fundamental credit characteristics, including the county's strong financial management practices and maintenance of ample reserves. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
CREDIT PROFILE
Iredell County is located in the Piedmont region of North Carolina, immediately north of Mecklenburg County. Statesville, the county seat, is 40 miles north of Charlotte and 50 miles southwest of Winston-Salem. The county's population in 2013 reached approximately 164,517, a 34% increase since 2000.
SOUND FINANCIAL CONDITION
Fiscal 2013 marks the third consecutive year of positive operating results for the general fund, with an audited surplus of $2.5 million (1.5% of spending), increasing the unrestricted general fund balance to $38.6 million or a strong 24% of spending.
Management estimates fiscal 2014 will result in another general fund net operating surplus, of $3.5 million, increasing the unrestricted fund balance to $40 million, a level (24% of spending) consistent with the prior year's.
Property taxes, which make up the bulk of general fund revenue (62%), exceeded the fiscal 2014 budget by $1.4 million as a result of 16 months of motor vehicle collections. The increase is a result of the state's transition to the Tag and Tax program, which collects vehicle property taxes simultaneously with registration renewals. Sales taxes, the second largest source of general fund revenue (18%), are also reflecting a positive variance, with receipts up 5% (approximately $1 million) compared to the prior year.
SURPLUS BUDGETED FOR FISCAL 2015
The fiscal 2015 budget totals $167.3 million, a 2% increase ($3.1 million) over the prior year's budget. The tax rate remains unchanged at a very competitive $0.485 per $100 of assessed value (AV), well below the state cap of $1.50 per $100 of AV.
Most of the growth in the fiscal 2015 budget stems from a $2 million increase for education. The budget also includes funding for five new positions ($266,550) in addition to a maximum 3% merit-based raise for employees ($625,000). The unassigned general fund balance is budgeted to increase by $1.2 million to a total of $40.3 million. Given the county's historical financial performance, Fitch expects management to continue to maintain sound reserve levels.
MANUFACTURING-BASED ECONOMY
Manufacturing is a significant economic driver in the county, representing about 16% of employment. This strong presence has contributed to high volatility of unemployment levels, ranging from a low of 4.4% in 2006 to over 11% from 2009 through 2011. Fitch observes that investments by some of the county's largest employers have resulted in strong recent employment growth, resulting in a significant 24.1% year-over-year decrease in the May 2014 unemployment rate to 6.3%. This rate is below the state average of 6.6% but remains slightly elevated compared to the U.S. rate of 6.1%.
Income levels, as measured on a median household basis, are above the state average (110.5%) and on par with the U.S. (96.9%). Positively, income continues to grow at a faster rate than state and national levels.
The county's tax base is relatively diverse, with the top 10 taxpayers accounting for 6.5% of taxable assessed value (TAV). The largest taxpayers include the headquarters of Lowe's, Duke Energy, and NGK Ceramics.
TAV has been fairly stagnant over the last several years. Management estimates for fiscal 2015 indicate a modest 1.2% decrease in TAV which reflects 12 months of vehicle tax valuation in fiscal 2014 and incorporates a decline in personal property due to depreciation of equipment. Management forecasts growth of 1%-1.5% over the next several years which Fitch views as reasonable given several projects planned or currently underway within the county.
LOW DEBT LEVELS
The county's overall debt levels are low at $2,142 per capita and 1.63% of market value. The county intends to issue a significant $163.5 million of debt (compared to $193.1 million currently outstanding) through 2019 for various school construction and renovation projects, pending voter approval of a GO bond referendum in November 2014. Fitch expects the county's overall debt profile to remain low-to-moderate over the review cycle based on current bonding plans and the rapid amortization of existing debt; 76% of principal is repaid within 10 years.
AFFORDABLE PENSION AND OPEB COSTS NOT A CREDIT PRESSURE
The county's contribution to various pension plans consumed approximately 1.7% of total governmental spending in fiscal 2013. The bulk of the annual cost is related to the county's participation in the Local Government Employees' Retirement System, which is among the strongest-funded state pension systems. Less than 1% of the budget is allocated to the cost of OPEB. All costs are expected to remain stable for fiscal 2015. Fitch notes debt service will increase in fiscal 2016 if the GO referendum passes and the county issues additional debt as planned.
Total carrying costs (including debt service, pension and OPEB costs) were moderate at 19% of governmental spending in fiscal 2013.
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, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, and the National Association of Realtors.
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
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=842819
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