NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the following ratings for Henderson County, North Carolina (the county):
--$5.8 million certificates of participation (COPs), series 2005A and series 2006A at 'AA-';
--Implied general obligation (GO) rating at 'AA'.
The Rating Outlook is Stable.
SECURITY
The COPs are payable from installment payments made by the county, subject to annual appropriation. The COPs are additionally secured by a mortgage lien on certain real property, including school facilities, a courthouse, and other governmental buildings.
KEY RATING DRIVERS
SOUND RESERVES: The county has maintained strong reserve levels, even after recent drawdowns for capital purposes.
LIMITED ECONOMY; POSITIVE JOB INDICATORS: The economic base, while limited in breadth, features consistent employment growth and below average unemployment levels. Income indicators are mixed, with per capita and household income close to or above state levels, but moderately below national averages.
MODERATE DEBT LEVELS: Debt levels should remain moderate even with additional planned issuance. Overall carrying costs (debt service, required pension payments and other post-employment benefit [OPEB] payments) are manageable.
COPs APPROPRIATION RISK: The 'AA-' rating on the COPs reflects the appropriation risk inherent in the installment payments to be made by the county to the trustee, the strong essentiality of the respective assets under the lien, and the general creditworthiness of the county.
RATING SENSITIVITIES
The rating is sensitive to shifts in fundamental credit characteristics including the county's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
CREDIT PROFILE
The county is located in the southwestern part of North Carolina, approximately 25 miles south of Asheville and 40 miles north of Greenville, South Carolina. Population, estimated at 109,540 in 2013, grew by about 23% from 2000 to 2013.
LIMITED ECONOMY; UNEMPLOYMENT REMAINS BELOW AVERAGE
The county's economy centers on manufacturing, tourism, and agricultural production. Employment trends have been positive in recent years and unemployment has been declining. The county's September 2014 unemployment rate (4.5%) declined from 5.5% a year prior and remains below comparable state (6.1%) and national (5.7%) rates. County income indicators are mixed, with per capita and household income close to or above state levels, but moderately below national averages.
The local economy is benefiting from ongoing economic development activity. A Sierra Nevada Brewing Company facility opened in 2014, providing about 100 new jobs and attracting new businesses to the area, including a wine and beer distributor, vineyards and hard cider producers. In early 2015, Sierra Nevada expects to open a tap room/restaurant facility, which will provide 150 new jobs. Additional recently established county businesses include various retail and restaurant establishments.
Following a decline of 8.6% in fiscal 2012, taxable assessed value (TAV) returned to growth in fiscal years 2013 (1.2%) and 2014 (3.3%). TAV is expected to decline modestly (less than 1%) in fiscal 2015. Management has indicated that this reflects a change in the motor vehicle registration system that resulted in a one-time increase in related fiscal 2014 values. Controlling for this, growth for fiscal 2015 is estimated at over 1%. Management expects continued near term modest tax base growth, which seems reasonable based on on-going economic development, including business additions/ expansions and new and renovation related construction activity. Taxpayer concentration is low, with the top 10 taxpayers (in the utilities, manufacturing, and retail sectors) representing about 5% of TAV.
HEALTHY RESERVE LEVELS
The county has maintained reserves at healthy levels, well above the county's 12% fund balance policy. A fiscal 2013 reduction in reserves of about $1.5 million (1.3% of spending) was due to one-time capital spending for land and facility acquisition. Even with this reduction, the fiscal 2013 general fund unreserved balance totalled $32.2 million, or 29% of spending. The county also maintains a restricted, statutory state stabilization reserve, which totalled $6.7 million in fiscal 2013 (6.2% of spending), providing an additional source of financial flexibility. The reserve primarily offsets accounts receivable.
Although the initial fiscal 2014 budget assumed a deficit of over $6 million, the county generated a surplus after transfers of $2.2 million, or about 2% of spending. The fiscal 2014 unrestricted general fund balance was $33.1 million or 30.3% of spending. The statutory state stabilization reserve adds another 7.4% of available balance.
The fiscal 2015 budget assumes an $8.7 million general fund deficit (7.5% of spending). However, based on the county's conservative budgeting and stronger than budget year-to-date performance, including stronger sales tax performance, management anticipates surplus operations for fiscal 2015. As the county has a trend of actual financial results performing better than budgeted expectations, this seems reasonable. Fitch expects fund balance levels to remain well above the county's 12% policy.
LOW DEBT LEVELS; CARRYING COSTS ARE MANAGEABLE
County debt levels are low at about $1,001 per capita and 0.9% of market value in fiscal 2014. Rapid amortization (about 90.5% of principal retired within 10 years) contributes to an elevated debt service to governmental spending ratio, equal to about 11.6% in fiscal 2013. Additional near term debt issuance plans include about $28 million to fund a health services and education facility, a joint project involving the county, the city of Hendersonville, the Margaret R. Pardee Hospital, Wingate University, and Blue Ridge Community College. The county is also considering debt issuance related to an emergency services facility. County debt levels are expected to remain low even with these additional debt issuance plans.
The county participates in the state-wide Local Governmental Employees' Retirement System (LGERS), a cost-sharing, multiple-employer plan. LGERS remains well funded at 99.8% as of Dec. 31, 2012 or 97.1% under Fitch's 7% discount rate assumption. In addition, the county administers a separate single employer defined benefit plan for law enforcement officers, which it funds on a pay-go basis. The plan's unfunded actuarial liability (UAAL) is minimal. OPEB benefits are also paygo funded, with a modest UAAL. Overall carrying costs, including debt service, total required pension contributions and OPEB payments, are manageable at about 14.4% of governmental spending.
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, 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=943495
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