NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the following ratings on Rutherford County, North Carolina (the county):
--$3.5 million general obligation bonds (GOs), series 2006 and 2008 at 'AA-';
--$17.4 million limited obligation bonds (LOBs), series 2011 at 'A+'.
The Rating Outlook is Stable.
SECURITY
The GOs bonds are backed by the county's full faith, credit, and unlimited taxing power.
LOBs are payable from installment payments subject to annual appropriation by the county and by a lien on essential government assets.
KEY RATING DRIVERS
SOUND FINANCIAL MANAGEMENT: The county's practice of conservative budgeting combined with timely revenue and spending adjustments have led to stable financial operations and sound reserve levels.
LIMITED ECONOMY: The county's economy is limited and remains somewhat concentrated in manufacturing. Wealth levels are below average relative to the state and the nation. The unemployment rate remains fairly high.
LOW DEBT BURDEN: Debt levels are very low and amortization of principal is rapid. Future debt plans are modest. Pension and retiree health costs are affordable.
APPROPRIATION LIEN ON ASSETS: The 'A+' rating on the LOBs reflects the appropriation risk inherent in the installment payments to be made by the county, the deed of trust on essential assets, 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 and solid reserve position. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
CREDIT PROFILE
Rutherford County is located in the Blue Ridge Mountains in southwestern North Carolina, about 70 miles west of Charlotte. The county's estimated 2013 population of 66,956 has grown 6.5% since the 2000 census.
BELOW-AVERAGE SOCIOECONOMIC INDICATORS
Despite efforts to diversify its employment and tax base, the county's economy remains concentrated in manufacturing and is therefore somewhat vulnerable during periods of economic softening.
Andale LLC has recently completed construction on two data centers in the county to be used for Facebook, an estimated $900 million investment. As a result, Andale is now the county's top taxpayer accounting for 9.4% of taxable assessed value (TAV). Incentive grants were provided by the county to Andale reimbursing a large portion of the company's annual taxes paid to the county and will run through 2031 assuming the company meets contractual requirements with the county. A $3.1 million incentive grant is budgeted for fiscal 2015 (tax revenues for Andale were a budgeted $3.4 million).
Employment base growth and labor contraction has resulted in a reduction in the unemployment rate. As of November 2014, the unemployment rate was 7% or a notable decline from 9.4% a year prior. Wealth indicators are weak with median household income representing 76.8% of the state and 67.3% of the nation.
The county's tax base has shown strong growth of 12.6% over the last two years, although this is largely reflective of Andale fully coming on the tax roll. Fitch has previously noted the county's weak property tax collection rate, but recent changes made by the state to personal property collections have improved the collection rate to a satisfactory 96.4% in fiscal 2014.
SOUND FINANCIAL MANAGEMENT
The county's finances are well managed and remain sound. The county realized a general fund surplus of $1.6 million (3% of spending) in fiscal 2014, which increased the unrestricted general fund balance to $14.9 million or a strong 27.2% of spending. Results remained in compliance with the county's 20% of spending fund balance goal. In evaluating the county's overall financial flexibility, Fitch also gives credit to the statutory stabilization reserve, which is generally composed of accounts receivable not offset by deferred revenue. This reserve totaled $4.1 million in fiscal 2014, or an additional 7.6% of spending.
The adopted fiscal 2015 budget was balanced with a $1.4 million appropriation of fund balance and maintained the tax rate at $0.607 per $100 of TAV, well below the statutory cap of $1.50. The county has a strong history of conservative budgeting with positive budget variances in each of the last seven years. Year-to-date results appear to track well compared to the budget and the county expects to end the year without using the full appropriation, which Fitch views as a reasonable expectation given the county's history of conservative budgeting.
LIMITED LONG-TERM LIABILITIES
The county's overall debt level is low at roughly $662 per capita and 0.7% of market value. Debt service payments represent a manageable 9.8% of governmental spending despite rapid principal amortization of 92.6% within 10 years. Future debt plans appear affordable. The county expects to issue roughly $1.8 million in privately placed bonds in April 2015 for a new library and emergency medical services station.
The county's other long-term liabilities are manageable. Most of the county's employees participate in the Local Governmental Employees' Retirement System (LGERS), a cost-sharing multi-employer plan administered by the state. The plan is among the strongest state plans, at 98.5% funded or an estimated 97% when adjusted by Fitch to reflect a 7% discount rate.
Other Post-Employment Benefits are prudently managed with the county continuing its practice of fully funding the annual required contribution. Total carrying costs for debt, pension, and other post-employment benefits were low at 13.8% of governmental spending in fiscal 2014.
INCENTIVE TO APPROPRIATE
The LOBs reflect a proportionate and undivided interest in rights to receive certain payments pursuant to an Installment Financing Contract between the county and the Rutherford County Public Facilities Company. The county has executed and delivered a deed of trust, granting funds appropriated for payment by the county of principal and interest on the associated bonds and a lien on the mortgaged property subject to permitted encumbrances. Mortgaged property conveyed under the deed of trust includes four schools, whose essentiality provides sufficient incentive to appropriate.
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, and 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=979039
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