Fitch Rates Isle of Wight County, Virginia's $23.9MM GOs 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA-' rating to Isle of Wight County, Virginia's (the county) $23,935,000 general obligation (GO) public improvement bonds series 2008B. The GOs are scheduled to price via negotiation on Dec. 4, 2008. Fitch also assigns an initial 'AA-' rating to the county's $64 million of outstanding GO bonds. The Rating Outlook is Stable.

The 'AA-' rating reflects the county's ample financial flexibility, as indicated by plentiful reserve levels, competitive tax rates, and moderately low debt burden. The rating also incorporates the county's below-average income levels and solid labor force and unemployment indicators, as well as its diversifying although still concentrated economic base. An inter-modal transportation infrastructure coupled with proximity to the growing Port of Virginia has enabled the county to support employment and tax base growth in the distribution sector. Fitch expects this continuing diversification to somewhat mitigate the employment concentration in manufacturing.

Isle of Wight is located in the Hampton Roads region of southeastern Virginia. Its economy, traditionally based in paper products, lumber, and meat processing has diversified as a result of the increased demand for warehousing and distribution that is driven by the growth of the near-by Port of Virginia. The county's Shirley T. Holland Intermodal Park has already generated $100 million of new private investment and 200 new jobs, including a 1.1 million square foot (sf) distribution center. Fitch believes that anticipated port growth by 2040 could support the county's projections for full build-out of the park at 20 million sf, with private investment of up to $20 billion. Currently, non-durable manufacturing accounts for a high 43% of earnings, nearly 10 times (x) the national average. The county has experienced sound labor force and employment growth since 2001, with September 2008 year-over-year increases of 2.9% and 1.7% respectively. Unemployment rates have been at or below state levels and below the national average since at least 1998. Per capita personal income is below both the state's and nation's and average annual growth lags as well.

Financial operations are consistent and strong. Isle of Wight ended fiscal year 2007 with a substantial total general fund and unreserved fund balance each equal to 42.2% of spending. Preliminary fiscal 2008 data indicate a decline in fund balance resulting from a planned drawdown to fund capital needs, although total fund balance will equal a still ample 40.3% of spending. Assessed valuation (AV) growth has averaged a sound 11.3% annually since fiscal year 2002, supported in part by the construction of two high-end housing developments. According to county officials, the housing market has remained solid over the past year, with median home prices increasing by 22.8% on a year-over-year basis in August 2008. However, the county projects modest AV growth in the out-years. Tax rates are among the lowest in the region and the county anticipates only limited increases during the current capital improvement plan (CIP). There is no concentration among the largest taxpayers.

The county's debt burden is expected to remain moderately low due to limited capital needs. Overall debt equals $2,799 per capita and 1.9% of market value and amortization is slightly above average. The county's fiscal years 2009-2013 CIP totals $148 million, although $76 million represents school needs that may yet be postponed. Future debt plans for non-school needs include private placements, with a $10 million 2009 issue and possible out-year issuances totaling $30 million. Operating revenues will fund about $32 million of capital needs. The county has utilized almost $20 million of pay-as-you-go financing in the past four fiscal years.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter-2009.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.