Fitch Rates Prince William County, VA's GO Public Improvement Refunding Bonds 'AAA'; Outlook Stable

Fitch Rates Prince William County, VA's GO Public Improvement Refunding Bonds 'AAA'; Outlook Stable | Bild: © ad-hoc-news

--$13.755 million GO Public Improvement Refunding Bonds, Series 2012A;

--$10.765 million GO Public Improvement Refunding Bonds, Taxable Series 2012B.

The proceeds of the series 2012A bonds will be used to refund outstanding GO improvement bonds, series 2004A, 2004C and 2007 for cost savings. The proceeds of the series 2012B bonds will be used to refund outstanding GO improvement bonds, series 2003A and 2004B, for cost savings. Both series of bonds are scheduled to sell via negotiation on February 14th.

At this time, Fitch also affirms the ratings on the county's outstanding debt as follows:

--$163.73 million general obligation (GO) bonds at 'AAA';

--$190.4 million certificates of participation (COPs) at 'AA+';

--$46.5 million Virginia Public Schools Authority special obligation financing bonds, series 2011 at 'AAA';

--$7.16 million Prince William County Industrial Development Authority lease revenue bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY:

The GO bonds are general obligations of the county, secured by its full faith and credit pledge.

The COPs and lease revenue bonds are secured by lease rental payments subject to annual appropriation by Prince William County; essential government assets are subject to seizure in the event of non-payment.

The VPSA special obligation bonds are payable from principal and interest payments on general obligation school bonds issued by the county, held by the VPSA, and pledged to the payment of the bonds.

RATING RATIONALE:

PRUDENT FISCAL MANAGEMENT: The 'AAA' rating on the county's GO bonds reflects the county's maintenance of solid reserves despite a previously weakened revenue environment that had been exacerbated by significant deteriorations in the housing market.

DYNAMIC ECONOMY: Anchored by the military and government, the county's economy continues to show above average employment indicators, despite employment declines in real estate related sectors.

BELOW-AVERAGE DEBT LEVELS: Overall debt levels are moderately low, and the county's solid debt position is further enhanced by rapid amortization and adherence to prudent debt policies.

APPROPRIATION RISK AND ESSENTIAL LEASED ASSETS: The 'AA+' rating on the COPs and lease revenue bonds reflects the county's credit characteristics as well as solid lease provisions and essentiality of the leased assets.

CREDIT SUMMARY:

STRONG LOCAL ECONOMY ENCHORED BY FEDERAL GOVERNMENT PRESENCE

The county benefits from its favorable location on the outskirts of the Washington, D.C. metropolitan region, affordable land prices, and a well-educated and trained workforce. Its stable economic base, rooted in government and military employment, has expanded to encompass the life sciences sector. The Quantico Marine Base (13,600 employees) and a forensic science/criminal justice cluster has helped attract contractors and federal agencies. Fitch anticipates that diversification into this new sector will be leveraged by the 1500-acre INNOVATION@Prince William business and technology park, which benefits from the academic anchor of George Mason University.

The county has experienced rapid population growth since the 1970s, with increases during the past decade outpacing those of the commonwealth by about three times. Historically, the county's unemployment rate has been lower than that of Virginia and the nation, as evidenced by the November 2011 unemployment rate of 4.7%. Wealth indicators far exceed those of the state and nation and are near regional levels.

The county's housing market appears to have leveled off following a retraction that resulted in housing price declines of roughly 50% since 2006. Flexibility to respond to the resulting AV and revenue reductions was imbued in the low fiscal 2007 property tax rate of $0.8071 per $100 of AV, a marked reduction from the high $1.419 at the beginning of the decade.

Systematic increases to $1.236 in fiscal 2011 once again positioned the county's tax rate as one of the highest in the region. However, the fiscal 2012 tax rate was modestly reduced to $1.204 given some recent stabilization of taxable values. Fitch takes comfort that due to lower property values and high wealth levels, the tax burden remains among the most affordable in the region. This should mitigate the higher tax rate's potential to hinder the county's competitive economic development position.

SOUND RESERVE LEVELS

Despite mounting pressure on revenues resulting from housing market declines, fiscal operations remain relatively stable, guided by closely monitored expenditure controls, regular financial reporting, and multi-year financial forecasting.

Fiscal 2010 closed with roughly break-even results and an unreserved general fund balance equal to a strong 19.3% of expenditures, transfers out, and other uses. As projected, fiscal 2011 featured positive general fund net operations of $16.5 million, bolstered by gains in sales and property taxes relative to budget. The fiscal year-end 2011 unrestricted (committed, assigned and unassigned) general fund balance totaled $183.8 million or a relatively stable and still strong 22%.

The adopted fiscal 2012 budget is balanced without the use of reserves. Balanced budgets and unassigned general fund balances at or above the county's policy of 7.5% of revenues are projected for the duration of the county's five year fiscal plan.

AFFORABLE DEBT PROFILE

Overall debt levels are expected to remain moderately low given the county's comprehensive planning and debt affordability guidelines. Overall debt equals $2,451 per capita and 1.9% of market value. The rapid amortization of nearly 70% of principal within 10 years (including certain park authority revenue bonds) offsets somewhat high debt service as a percent of the general fund expenditures of 13%. The county's approximately $1 billion fiscal year 2012 - 2017 capital improvement plan (CIP) is substantially larger than the $764 million of fiscal years 2011 -2016, given the reinstatement of various projects deferred during the economic recession. Education, at $674 million, drives the CIP, in line with the rapid population growth. Two-thirds of the CIP will be debt financed. Pension obligations remain well managed.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

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, Zillow.com, National Association of Realtors, and Property and Portfolio Research.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 15, 2011);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).

For information on Build America Bonds, visit www.fitchratings.com/BABs.

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842

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