NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'A' rating on the following Orangeburg County, South Carolina (the county) bonds:
--$4.3 million general obligation bonds series 2008.
The Rating Outlook is Stable.
SECURITY
The bonds are a general obligation of the county backed by its full faith and credit and unlimited taxing power.
KEY RATING DRIVERS
BELOW AVERAGE ECONOMIC METRICS: The economy remains rooted in manufacturing and continues to exhibit high unemployment and low wealth indices.
STABILIZING FINANCIAL OPERATIONS: The general fund has reported a surplus in each of the last three fiscal years, increasing reserves. General fund liquidity remains weak.
MANAGEABLE LONG-TERM LIABILITY BURDEN: Overall debt burden is moderate. High carrying costs are mitigated by very rapid amortization and affordable post-retirement costs.
RATING SENSITIVITIES
NARROW CASH MARGINS: General fund liquidity is narrow; failure to maintain adequate liquidity would lead to a negative rating pressure.
CREDIT PROFILE
Orangeburg County is in the Lower Savannah section of South Carolina, approximately 40 miles south of Columbia, the state capital, and 75 miles northwest of Charleston. The county's population has declined slightly over the past decade to an estimated 2014 level of 90,942.
STABILIZING FINANCIAL OPERATIONS
Three years of general fund net operating surpluses have improved reserves. The general fund ended fiscal 2013 with a surplus of $2 million increasing unrestricted fund balance to $4.1 million or an adequate 12.7% of spending. Operations were affected by one time revenues in fiscal 2013, including a land sale of $1.1 million.
General fund liquidity is weak with $1.4 million in cash and investments equating to 15.8 days cash on hand. Cash in the governmental funds is pooled throughout the fiscal year providing some additional liquidity.
Initial expectations for financial operations in fiscal 2014 are positive and the county expects to continue its recent trend of surplus operations in the general fund.
The fiscal 2015 budget was balanced without the use of fund balance. The county increased the millage rate by 2 mills to $134.3 per $1,000 of taxable assessed value. The county's taxable assessed value increased following a reassessment in 2014 to $256.4 million, up 2.8% from the prior year.
Property taxes comprise roughly 70% of general fund revenues. A statutory cap on annual levy growth generally limits management's revenue flexibility; however, the county has accumulated some additional millage capacity above the statutory formula by virtue of having limited tax increases from 2011-2014. Taxpayer concentration is high owing to the presence of South Carolina Electric and Gas (Fitch long-term issuer default rating of 'BBB+') which accounts for more than 12% of the tax base.
ECONOMIC CONDITIONS REMAIN WEAK
Per capita and median household income metrics are well below average at 61% of the state and 62% of the nation, and the individual poverty rate is a high 23.7%. Market value per capita is quite low as well at roughly $42,000. Unemployment within the county is consistently high relative to the state and the nation. The monthly unemployment rate was 11.2% in November compared to 6.3% for the state and 5.5% for the nation. While unemployment remains high, the rate is reduced from the 12.3% recorded a year prior as the county experienced job growth of 3.1% amid labor force growth of 1.9%.
LARGE MANUFACTURING PRESENCE
The tax base is quite concentrated, with the top ten taxpayers accounting for nearly 20% of TAV. Manufacturing accounts for roughly 18% of total employment in Orangeburg County compared to 11% for South Carolina and 9% for the nation. The county's industrial base is diverse with companies specializing in lawn equipment (Husqvarna), roller bearings (Koyo), pharmaceuticals (SI Group), and polymer tubing (Zeus) among others. County officials attribute recent significant investments by various manufacturing firms to the use of incentive programs and its favorable proximity to interstates 26 and 95 as well as the Port of Charleston. Husqvarna's 2,000 employees account for almost 6% of the county's employment base; as such, the firm plays an important role in the county's economic outlook.
MODERATE DEBT PROFILE
The county's overall debt burden remains moderate at 3.7% of market value and $1,562 per capita. The majority of the county's overall debt burden is driven by overlapping school district obligations.
The county does not maintain a formal capital plan however capital needs are primarily funded by the capital projects sales tax, which is required to be passed in association with defined projects that will be eligible to be funded through its proceeds. This tax has been approved in three consecutive referenda by a large margin. The most recent referendum, in November 2010, provides for the collection of the sales tax for a seven-year period that began in May 2013 and is expected to generate $84 million in revenue for capital projects.
MANAGEABLE PENSION LIABILITY
Pension liabilities are limited to the county's participation in various multiple-employer plans administered by the state. While these plans are poorly funded, the state does fund at the full actuarial requirement and the county's contributions consume an affordable portion of its budget.
Other post-employment benefits (OPEB) are paid on a pay-as-you-go basis. The unfunded actuarial accrued liability is modest at 1% of market value. Overall carrying costs for debt service, pension, and OPEB are high at 23.9% of governmental spending, although largely driven by rapid principal amortization of 99% within 10 years.
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, Underwriter, Bond Counsel, Underwriter Counsel, Trustee.
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=975255
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