Fitch Affirms Cobb County Solid Waste Auth's (GA) Rev Rfdg Bonds at 'AAA': Outlook Stable

NEW YORK--(BUSINESS WIRE)--As part of its ongoing surveillance efforts, Fitch Ratings affirms its 'AAA' rating on Cobb County Solid Waste Management Authority, Georgia's (the authority) approximately $12.4 million outstanding solid waste management authority revenue refunding bonds, series 2004. The Rating Outlook is Stable.

The 'AAA' rating on the authority's series 2004 bonds reflects strong legal provisions ensuring contractual payments by Cobb County (the county) equal to debt service, as well as the county's exceptionally strong long-term credit characteristics, including strong financial management and capital planning, a growing and diverse area economy, a low debt burden, and significant capital funding from current resources.

The authority is a public corporation created to acquire, construct and equip a solid waste management and disposal facility. The bonds are limited obligations of the authority secured by a pledge of its right, title, and interest in the county's contractual payments, which have been assigned to the bond trustee. The county's obligation to make the contractual payments to the authority equal to debt service is absolute and unconditional. Pursuant to an intergovernmental contract between the county and the authority, the county has agreed to exercise its power of unlimited ad valorem taxation to raise sufficient revenue to make the contractual payments.

As part of the Atlanta metropolitan statistical area (MSA), the county's economy has diversified significantly over the years, leading to above-average wealth levels, historically good employment indicators and solid population growth. A diverse group of major corporations and military-related operations provide the majority of private sector employment in the county. WellStar Health Services, Inc. and Lockheed Martin Corp. are the largest county private employers, with over 9,000 and 6,000 employees, respectively. Similar to regional and national trends, the county's unemployment rate, measured at 9.6% in September 2009, increased by 3.5% versus one year prior, though the figure still falls comfortably below the MSA, the state, and the nation. Income levels continue to rank well above regional, state and national indicators, and while home foreclosures have risen significantly and property tax collections have reportedly dropped by about 1%, officials still expect property tax revenue to remain in line with budgeted amounts.

Despite two consecutive years of draw-downs leading up to fiscal 2009, the county's financial position remains healthy, characterized by prudent budgeting, good reserve levels, solid tax base growth, and relatively low tax rates that provide additional financial flexibility. Draw-downs in the general fund in fiscal years 2007 and 2008 brought the county's unreserved, undesignated general fund balance down to $34 million, equal to its policy established minimum balance of 10% of budgeted expenditures. The decline in fund balance is due in part to a shortfall in non-ad valorem revenue in fiscal 2008 as well as a greater amount of pay-as-you-go (pay-go) funding for capital projects, which Fitch generally views as favorable. A $13.1 million unreserved, undesignated fund balance in the county's second operating fund, the fire district fund, is equal to a strong 18% of spending and transfers out and provides additional operating financial flexibility.

Preliminary, unaudited results for fiscal 2009 show a small operating surplus in the general fund of about $1.2 million, despite a significant negative variance in property tax revenues relative to the adopted budget. The weaker than anticipated property tax revenues were driven primarily by weakened tax collection rates indicative of housing market pressures. The revenue decline was offset by mid-year budget cuts, which included implementing a hiring freeze and eliminating unfilled positions and merit and overtime pay, among other cost saving measures.

While tax base growth has been solid in recent years, averaging almost 7% annually since 2003, 2008 registered a much slower rate of growth (3.8%), and the 2009 digest shows a slight decline in assessed value. The amended fiscal 2010 budget incorporates the state's recently enacted moratorium on increases in assessed value of property and shows a 5% overall reduction in general fund revenue relative to the 2009 adopted budget.

Driven by poor investment returns, Fitch believes the funding ratio for the county's pension remains weak for the rating level at 60% through fiscal 2008, though management has implemented various measures aimed at improving the funding ratio over the coming years. Favorably, in 2008 the county established a trust with an initial deposit equal to its actuarially required contribution of $19.5 million to begin pre-funding its OPEB liability, which is estimated at $223.4 million. In conjunction with the establishment of the trust, the county also reduced benefits for some existing employees and all newly hired employees in 2008 to reduce the long-term liability.

The county's very low debt levels are the result of sound capital planning that includes a substantial amount of pay-as-you-go financing and rapid debt amortization. Overall debt, which includes overlapping units, is low at $419 per capita and 0.34% of market value. In September 2005, county voters narrowly approved a 1% Special Purpose Local Option Sales Tax (SPLOST) to finance various capital projects, including a new jail, a new courthouse, replacement of the countywide 800 mhz radio system, and transportation improvement programs.

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