Fitch Rates Macon-Bibb, GA's Authority Revs 'AA'; Outlook Stable

NEW YORK--()--Fitch Ratings has assigned an 'AA' rating to the following bonds:

-- $12.5 million Macon-Bibb County Urban Development Authority (UDA) taxable refunding and improvement revenue bonds series 2015A;

-- $7.0 million Macon-Bibb County UDA refunding and improvement revenue bonds series 2015B;

-- $8.8 million Macon-Bibb Industrial Authority (IA) refunding revenue bonds (Basspro and Sofkee Park Projects) series 2015

The bonds are expected to be sold through negotiation on April 27, 2015. Proceeds will be used to refund to fixed rate the IA series 2009 variable rate bonds, to restructure a portion of the UDA's series 2007, 2013A and 2013B bonds, fund blight removal and other governmental projects.

The Rating Outlook is Stable.

SECURITY

The revenue bonds are special obligations of the authorities, payable from installment payments made by Macon-Bibb county (the county) to which the county has pledged its full faith, credit, and unlimited taxing power. The county's obligation to make installment payments is absolute and unconditional, and not subject to appropriation or abatement.

KEY RATING DRIVERS

FINANCIAL FLEXIBILITY

Adequate reserves and the absence of taxing limits provides financial flexibility. Voters recently approved consolidation of the city of Macon and Bibb county for efficiencies and cost savings. Annual expenditure cuts are required to meet established targets, although Fitch expects reserve levels to remain satisfactory.

DIVERSE REGIONAL ECONOMIC CENTER

As a regional center for central Georgia, the county has a diverse economic base. Taxbase and employment has experienced some erosion, although recent business expansions and residential home value stabilization are noted.

BELOW AVERAGE SOCIOECONOMIC PROFILE

Wealth indices lag the state and nation, partially reflecting the low cost of living in the county. The poverty rate is a high 24.9%.

MODERATE CARRYING COSTS

Debt ratios are moderate and benefit from the use of pay-as-you-go-revenues for capital needs. Future borrowing plans are limited. Overall carrying costs are moderate.

RATING SENSITIVITIES

The rating is sensitive to trends in the economic profile and financial position. New firms are locating to the county and coupled with the county's aggressive blight control efforts, improve the prospect for taxbase stabilization. However, a failure to maintain satisfactory reserves could pressure the rating.

CREDIT PROFILE

The consolidated government, the county, is located in central Georgia, 80 miles south of Atlanta, and serves as the economic hub for the region. The population has been generally stable since 2000; the 2014 population was 154,721.

REGIONAL ECONOMIC CENTER

Several major highways intersect in the county, allowing access to Atlanta, the deep water port in Savannah and the surrounding counties. Healthcare and retail trades are the largest employment sectors, reflecting the county's status as an economic hub. The two largest employers are the Medical Center of Central Georgia (6,200) and GEICO (5,000). The presence of Mercer University and a number of manufacturing concerns add diversity to the economic base. Approximately 25% of the land area is agricultural.

The taxbase is not concentrated as the top ten taxpayers account for less than 8% of taxable values. Leading taxpayers include a utility, architectural products manufacturer and a biomass paper mill. The taxbase declined 8.9% over the period from fiscal 2010 to 2015 reflecting a weakening in property values. According to data from Zillow Group, home values appear to be stabilizing. Mortgage delinquencies are below the national average.

Several recent economic development announcements may also help to stabilize and reverse the taxbase trend. Most notably, Komho Tire is investing $400 million in a new manufacturing plant expected to employ 400. Another recent significant recent economic announcement is a hiring increase of 500 employees at GEICO.

CONSOLIDATION ENTAILS COST REDUCTIONS

The consolidation of the city of Macon and Bibb County was approved by voters with the objective of greater efficiency and lower costs. The merger was effective January 1, 2014. The first full fiscal year and first joint budget of the new government was effective July 1, 2014. Per the consolidation legislation, by 2019 the budget is to be 20% less and annual expenditure reductions are stipulated to be at least 5%.

Management has utilized several actions to cut and contain costs, including hiring freezes for non-essential positions, spending controls, and a recently implemented pension tier for new employees. Additional measures under consideration are a retirement incentive and possible increased employee health insurance premiums. The adopted fiscal 2015 general fund budget is $159 million, and the target budget to be achieved by the 2018 budget is $142 million which Fitch believes is an achievable goal.

The primary general fund revenue source is property taxes (47%), followed by sales taxes (22%) and gross receipts (16%). With consolidation, the county plans to make the real property tax rate uniform throughout the county, and has begun reducing the former city tax rate. The lost revenues are offset by a combination of expenditure reductions and increases in other revenues. Previous to consolidation, the gross receipts tax was primarily levied in the former city and is now levied county wide. The general fund receipt of an insurance premium tax (also enabled by consolidation) together with the expansion of the gross receipts levy provide an estimated $12 million in additional revenue.

The real property tax rates for fiscal 2014 in the former city and former unincorporated county were 21.70 and 14.65, respectively. In 2015 the city rate was lowered to 19.50 mills and in fiscal 2016 the tax rate is expected to be uniform throughout the county at 14.65 mills. The county has the flexibility to adjust the tax rate.

ADEQUATE RESERVES

The new government's first audit report covers the six months ending June 30, 2014. The general fund closed with an unrestricted fund balance of $32.7 million which represents 20.6% of the fiscal 2015 budget, the first full year of consolidated operations. The county's policy is to maintain reserves sized at 45 days of normal spending (12.3%).

The fiscal 2015 budget is balanced and the county reports operations are generally on target with a possible small use of reserves. No significant deviations are anticipated in general fund revenues or expenditures.

MODERATE LONG-TERM LIABILITIES

Debt metrics are low with debt per full value 1.1% and debt per capita $779. Prior to the refunding long term debt had a very rapid payout of 82% in ten years, with debt service steeply declining. With this refunding debt service is restructured, softening the decline. Maturities are not extended with the refunding and amortization is still rapid with 69.7% maturing in ten years.

The county's 2015 to 2019 capital improvement plan is a moderate $221 million, net of debt service. The majority of funding is provided by the special local option sales tax revenue which was approved by voters for collection through March 31, 2018. The tax generates approximately $30 million per year and is restricted for capital purposes. A portion of the tax is used to fund outstanding debt service. Total debt service for fiscal 2015 is approximately $18 million.

Also in the CIP are planned airport improvements in 2018 tied to planned deepening of the port of Savannah, which is the fourth busiest port in the U.S.

The pension burden is manageable as the total net unfunded liability is $39 million or a modest .4% of the market value of real property. The consolidated government maintains three retirement plans: two city plans (closed to new entrants) and the county plan. The city plans include the general employee plan and the police and fire city plan, and have funded ratios of 83.8% and 108.1%. The county employees' pension plan is funded at 71.9%. All employees hired after January 1, 2014 are members of the county plan and the new hires have reduced pension benefits, tempering the trajectory of future pension costs. The pension ARC for the three plans for the year ending June 30, 2014 was $13.4 million.

In addition, the county maintains two other post-employment benefit plans (OPEB) which have a combined unfunded liability of a moderate $59.4 million. Retirees make a contribution towards premiums. For several years the county contributed to an OPEB trust and the county OPEB plan was 51.4% funded as of Dec. 31, 2013. In fiscal 2013 the county and city made paygo contributions for benefits of $2.5 million and $1.6 million, respectively. The former city plan has no assets. In fiscal 2013 the total carrying costs (debt service, required pension contribution and actual OPEB contributions) were 11.6% and 15.6% for the former county and former city, respectively.

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, Zillow Group.

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=982868

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Patricia McGuigan, +1-212-908-0675
Director
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Parker Montgomery, +1-212-908-0356
Analyst
or
Committee Chairperson
Amy Laskey, +1-212-908-0568
Managing Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings, Inc.
Primary Analyst
Patricia McGuigan, +1-212-908-0675
Director
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Parker Montgomery, +1-212-908-0356
Analyst
or
Committee Chairperson
Amy Laskey, +1-212-908-0568
Managing Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com