NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'AAA' rating for Hanover County, VA's (the county) $88.2 million general obligation (GO) bonds currently outstanding.
The Rating Outlook is Stable.
SECURITY
The bonds are general obligations of the county, backed by its full faith, credit, and unlimited taxing power.
KEY RATING DRIVERS
SOUND FINANCES: County finances are solid, aided by conservative budgeting practices and out-year financial planning, and featuring strong reserves.
STRONG SOCIOECONOMIC INDICATORS; RECENT TAX BASE GROWTH: County income levels are above average, and unemployment is low relative to the state and nation. Taxable assessed value (TAV) has returned to growth after recent year declines.
LOW DEBT BURDEN: Debt ratios are moderate and are expected to remain so even with additional debt issuance plans. Debt service as a percentage of governmental spending is midrange, but amortization is rapid. Overall carrying costs including debt service, required pension payments and other post-employment benefit (OPEB) payments are manageable.
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
Hanover County is located in central Virginia about 90 miles south of Washington D.C., and 12 miles north of Richmond, VA. The county's population, estimated at 101,330 in 2013 grew by about 17% from 2000 to 2013.
SOLID FINANCIAL PERFORMANCE
County finances are solid, aided by active management, conservative budgeting, and multi-year planning. The county has maintained strong reserve levels above the policy requirement of a minimal unassigned balance of 10% of revenues. Unassigned balances have been about 13% of revenues in recent years.
Fiscal 2013 ended with a modest general fund deficit, after transfers, of $1.4 million or 0.7% of spending. This was significantly lower than the initially budgeted deficit of $11.9 million, and reflected about $4 million in capital spending. The general fund unrestricted ending balance was a strong $43.4 million or 21.6% of spending. Fiscal 2014 ended with a general fund surplus after transfers ($6.4 million or 3.3% of spending) vs. a budgeted deficit of $8.7 million. This increased the general fund unrestricted ending balance to $49.4 million or 25.1% of spending.
The county is conservatively budgeting a deficit of $7.8 million (3.6% of spending) for fiscal 2015. However, actual results are expected to be positive, as expenditures were budgeted conservatively, including a $1.3 million contingency appropriation reserve, and revenues are running ahead of budget. Since the county has a trend of actual financial results performing better than budgeted expectations, this seems reasonable. Fitch expects that the county will continue to maintain reserves at strong levels.
The county generates the majority of its revenue from property taxes (63% of fiscal 2014 revenues). The county's tax rate is competitive at $0.81 per $100 of assessed value. The rate has been unchanged since fiscal 2007, providing a measure of financial flexibility going forward.
SOLID SOCIOECONOMIC INDICATORS
County economic indicators remain sound. Employment trends have been positive in recent years, with employment growth outpacing labor force growth, and unemployment declining. The county's September 2014 unemployment rate (4.7%) is down from 5% a year prior and remains below comparable state (5.2%) and national (5.7%) rates. County income levels are above average.
The county remains largely rural but is experiencing ongoing commercial and residential expansion, guided by a comprehensive plan that addresses schools, transportation and infrastructure needs. Recent development includes Health Corporation of America's $10 million Hanover Emergency Center, and a new $6.5 million Richmond Harley-Davidson facility that includes an events space and motorcycle safety school. In addition, construction of a $20 million OrthoVirginia / Bon Secours Richmond Health System medical facility has begun. The facility is expected to be open in early 2015.
LOW DEBT LEVELS; MANAGEABLE CARRYING COSTS
County debt levels are low at about $1,535 per capita and 1% of market value in fiscal 2014. Debt service as a percentage of governmental spending is midrange at 9.8%, but amortization (about 69% of principal retired within 10 years) is rapid. Additional near term debt issuance plans include about $20 million to fund construction of a new courthouse facility and $15 million for school capital projects. County debt levels are expected to remain moderate even with these additional debt issuance plans.
The county participates in the statewide the Virginia Retirement System (VRS) an agent multiple-employer defined benefit pension plan. The county has been fully funding its required plan contribution, which represented a manageable 3.5% of fiscal 2014 governmental spending. The funded ratio as of June 30, 2013 was 78.4%. The county also provides OPEB benefits to county retirees, with related payments in fiscal 2014 at 0.2% of governmental spending. Overall fiscal 2014 carrying costs, including debt service, required pension contributions and OPEB payments, are manageable at about 13.5% 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=953475
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