2008-05-08 23:34:12 -
- Fitch assigns an 'AA' rating to Milwaukee County, Wisconsin's $30,860,000 general obligation (GO) corporate purpose bonds, series 2008A, scheduled for competitive sale on or about May 22, 2008. In addition, Fitch has affirmed $443.5 million of outstanding general obligation debt at 'AA'. The Rating Outlook is Stable. The bonds are GOs of the county, which pledges its full faith
and credit to levy unlimited ad valorem taxes. The corporate purpose bonds will finance various capital projects, including highways, bridges and public art projects.
The Milwaukee area's economic indicators are mixed. Property values have grown 8.6% annually since 2001, including an 8.9% increase for 2007, although residential homebuilding activity has since weakened slightly. Manufacturing remains an important sector, but the service industry has expanded at a faster pace. The county's employment base, reflecting manufacturing's influence, has remained flat in the past decade. The county's unemployment rate, after reaching its low point of 3.8% in 1999, increased gradually to 7.1% in 2003. More recently, the unemployment rate declined to 6.1% in February 2008, the same rate as in February 2007. Over the long run, economic growth in the county has lagged the state and national rates and can exhibit more volatility due to manufacturing cycles.
Milwaukee County's financial management has been under increased pressure in recent years due to personnel costs and inefficient service delivery in certain departments which required restructuring. Many key labor contracts are in place through 2008, with manageable salary increases and greater employee contributions to fringe benefit costs. Although pension benefit changes in 2001 led to increased retirements and lump-sum pension payments, the county government has eliminated certain pension benefits for new employees and will focus on cost constraint through better oversight. To address the unfunded liability, and control the cost of future required contributions, the county is considering issuing pension obligation bonds in the approximate amount of $267 million later this year.
The general fund unreserved balance at the end of 2006 (December 31 year-end) was a minimal 0.67% of spending and transfers out, consistent with prior years. Including balances in other governmental funds the county had an ending unreserved balance of $80.9 million or 8.2% of spending and transfers out, which Fitch considers more consistent with the rating level. The county's preliminary estimates for 2007 indicate a $7 million general fund surplus. While sales tax revenues continue to underperform budget expectations so far in 2008, the county believes financial operations will balance when $6.6 in contingency funds are included.
The county's direct debt burden is moderate. Direct debt remains low at 0.7% of fair market value and $529 on a per capita basis; overall debt is 4.1% of fair market value and $3,002 per capita. Overall debt amortization remains rapid at 94% in ten years. The five-year capital program (2008-2012) totals $603.2 million, but includes $256.8 million for airports which finance capital through revenue bonds. The county usually finances about half of its capital needs through debt. With planned pension obligation bonds, direct debt levels would rise significantly but overall debt would remain moderate at $3,293 per capita and 4.5% of fair market value.
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.
Fitch Ratings, Chicago
Melanie A.J. Shaker, 312-368-3143
A. Paul Sadlowski, 312-368-3198
Peter Stettler, 312-368-3176
Cindy Stoller, 212-908-0526
(Media Relations, New York)
