2008-07-10 23:58:10 -
- Fitch Ratings assigns an 'AAA' rating to Montgomery County, Maryland's (the county) estimated $250 million general obligation (GO) bonds, consolidated public improvement bonds of 2008, series A. The bonds are scheduled to price via competitive sale on July 22, 2008. The bonds will redeem an equivalent amount of commercial paper, thereby providing permanent financing for county capital projects. Fitch
also affirms the following outstanding ratings:
Montgomery County, Maryland
--$1.5 billion GO bonds at 'AAA';
--$33.6 million certificates of participation, (Equipment Acquisition Program) at 'AA+';
--$38.3 million lease obligations (Metrorail Garage Projects) at 'AA'.
Maryland Economic Development Corporation
--$41.5 million lease revenue bonds at 'AA+'.
Montgomery County Revenue Authority
--$22.8 million lease obligations, (Germantown Indoor Swim Center Project) at 'AA+';
--$15.0 million lease obligations, (Conference Center Project) at 'AA'.
Maryland-National Capital Park and Planning Commission (M-NCPPC)
--$48.3 million Montgomery County GOs at 'AAA'.
The Rating Outlook is Stable.
Bordering Washington, D.C. and northern Virginia, Montgomery County's wealthy suburban economy is fueled by a large U.S. government presence, which provides stability to the region. The biotechnology sector continues to expand, drawing on the county's well-educated labor force. Montgomery County is also developing its four central business districts. The county's unemployment rate has been below state and federal averages since at least 1998, with the May 2008 unemployment rate of 2.9% significantly below the state's 3.8% and the nation's 5.2% (rates are not seasonally adjusted). Various economic indexes have consistently ranked the county, which had an estimated 2007 population of 930,813, among the wealthiest in the nation. Real property assessed valuation (AV) growth has averaged a steady 11.1% annually since fiscal 2003, and Maryland's three-year phase-in of annual AV should contribute to continued solid tax base growth over the next several fiscal years.
The Washington, D.C. metro area has been hit hard by the housing market with large increases in foreclosures and projected declining home prices over the next five years. The county itself has seen sizable increases in foreclosure activity over the past year, and a decrease in certain related revenues. However, important factors such as a triennial property assessments and the homestead property tax cap, which limits taxable AV growth to 10%, are likely to somewhat mitigate fiscal pressure from the housing market over the longer term.
The county has demonstrated outstanding financial management through solid financial planning and performance and its commitment to reducing growth in outyear budgets. The county ended fiscal 2007 with a strong financial position: in addition to the $119.6 million revenue stabilization fund, the unreserved general fund balance of $309 million represented 11.7% of spending. FY08 reserve levels of 6.8% of total resources will exceed the 6% policy level. Expenditure controls, reduced pay-as-you-go capital funding and an override of the charter limitation on property tax revenues enabled a balanced fiscal 2009 budget. Fitch Ratings is confident that Montgomery County will adopt a balanced budget in the out-years, despite currently projected deficits.
Debt levels are moderate, and amortization remains rapid with 69% of outstanding principal retiring within 10 years. Excluding debt of the Washington Suburban Sanitary Commission (WSSC), which is ultimately secured by property taxes but actually paid from rates and charges on properties served, overall debt equals about $2,174 per capita, or 1.3% of market value. When considering WSSC debt, overall debt remains moderate, around $3,176 per capita, or 1.9% of market value. The fiscal years 2009-2014 recommended capital improvement plan totals $3.2 billion and allocates substantial funding for schools (44%), transportation (22%), and the community college (10%). Major sources of funding include general obligation bonds (57%) and intergovernmental revenue. Reduced levels of fiscal 2009 pay-as-you-go funding of about $5 million, in contrast to the $30 million policy level, reflect the county's prudent response to increased operating budget pressures.
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, New York
Barbara Ruth Rosenberg, +1-212-908-0731
Alexandra Knight, +1-212-908-9181
Christopher Kimble, +1-212-908-0226 (Media Relations)
