Fitch Rates Westchester County, New York's $117.33MM GOs 'AAA'; Upgrades Outstanding GOs to 'AAA'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AAA' rating to Westchester County, New York's (the county) approximately $135,160,000 general obligation (GO) serial bonds, consisting of the following:

--$108,405,000 2009 series A;

--$8,925,000 2009 series B bonds;

--$17,830,000 series C refunding bonds.

The bonds are scheduled to sell via negotiated sale on Jan. 22, 2009. Fitch also upgrades the county's $672 million in outstanding GOs to 'AAA' from 'AA+'. The Rating Outlook is revised to Stable from Positive.

The upgrade of the outstanding GO rating to 'AAA' reflects the favorable resolution of the county's financial exposure to the Westchester County Health Care Corp. (the medical center) with the execution of a cooperation agreement and the improving financial condition of the medical center. The agreement, effective Jan. 1, 2008, between the county and the medical center replaced an existing transition agreement, reflects a reduced level of financial commitment on the part of the county, and sets forth financial goals for the medical center. Credit strengths include the county's broad and diverse tax base, long history of conservative and prudent financial management, willingness to raise recurring revenues. Adding to the county's credit strength is its moderate debt profile and the New York State cap on the growth of counties' share of Medicaid spending. The upgrade and Stable Outlook reflect Fitch's expectation that the county will continue its practice of conservative financial management and planning to address its ongoing high mandated and fixed-cost burden in order to maintain its financial flexibility.

Westchester County, just north of New York City, is one of the nation's most affluent counties. Benefiting from the strong regional economy, per capita income levels remain well above state and national averages. The unemployment rate as of October 2008 at 4.9% is well below the state and national levels of 5.4% and 6.1%, respectively. Services and finance, insurance, and real estate make up nearly 60% of total employment and 52% of earnings. Assessed valuation (AV) growth has been solid since 2000, declining less than 1% in 2009. The county reports that its housing market has seen a minimal decline in home prices but is experiencing an increase in the number of foreclosure judgments.

Like all New York counties, Westchester faces a heavy mandated cost burden, including Medicaid, health insurance, and pension payments, although the state has provided some relief for rising Medicaid requirements by assuming responsibility for growth over 3%. The county has shown a willingness to raise recurring revenue when needed. The county received state approval for a 0.5% sales tax, now extended through May 2010. The unreserved general fund balance declined slightly in 2007, to a still solid 10.4% of expenditures and other uses from 12.4% in 2006. The county expects results for 2008 to be on budget as a result of expenditures savings implemented early in the year and conservative budgeting with a moderate decline in unreserved general fund balance comparable to 2007. The county has continued its practice of conservative revenue and expenditure assumptions for 2009 and adopted a 1.77% property tax levy increase.

Debt levels are manageable in relation to the county's wealthy economic base. Overall debt is $4,461 per capita and 2.25% of property value, reflecting a high market value of $198,318 per capita. Debt amortization is rapid at 75% in 10 years. The county has a thorough, charter-mandated five-year capital planning process. The proposed plan for 2009-2013 totals $4.7 billion, $1.985 billion of which has been appropriated and $1.177 billion has already been debt-financed.

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 of 2009.

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