2008-10-21 02:34:59 -
- In the course of routine surveillance, Fitch Ratings affirms the following outstanding debt ratings for Rutherford County, North Carolina (the county):
--$10 million general obligation (GO) bonds 'A+';
--$23 million certificates of participation (COPs), series 2002 'A'.
The Rating Outlook is Stable.
The 'A+' rating on the GO bonds reflects the county's solid financial position
and moderately low debt levels with above-average amortization. The county's limited economy is centered on manufacturing, and economic indicators (including unemployment and income) are below-average relative to the state and the nation.
The 'A' rating on the COPs reflects the standard lease provisions, the essentiality of the financed projects, and the fact that COP payments are subject to annual appropriation, as well as the general credit characteristics of the county. Mortgaged property conveyed under the deed of trust includes the three financed schools, whose essentiality provides sufficient incentive to appropriate. Due to the county's improved financial performance, exemplified by the increased reserve levels, the rating no longer incorporates a one-notch enhancement reflecting the financial oversight of the North Carolina Local Government Commission. The Stable Rating Outlook reflects Fitch's expectation that continued conservative financial planning will allow the county to maintain its solid financial position, despite potential vulnerability from housing market softening and the broader economic slowdown.
County financial operations are stable, and available reserves, which have increased since the beginning of the decade, should provide an adequate cushion to weather potential shortfalls. Fiscal 2007 closed with an unreserved fund balance of $10.6 million, equal to 19.5% of spending, which is a significant increase from the unreserved fund balance in Fiscal 2002 of $5.2 million and 12.9% of spending. While the county plans to use a portion of fund balance in Fiscal 2008 for a land purchase, the expectation is such that the county will reimburse itself for monies spent through a debt financing in 2009, thereby replenishing reserves.
Rutherford County is located in the Blue Ridge Mountains in western North Carolina, about 70 miles west of Charlotte. Its population of 63,012 has remained flat this decade, in contrast to the moderate 10.5% growth of the 1990s. Sales in new residential developments have stagnated, although home prices increased on a year-over-year basis in the second quarter of 2008. While the county's economy remains concentrated in manufacturing and is therefore somewhat vulnerable during periods of economic softening, efforts have been made to diversify the employment and tax bases. Growth in the tax base has been modest; a revaluation effective for Fiscal 2008 resulted in a 33% increase in the county's tax base.
Note: Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'). At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.
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
Jaissy Lorenzo, 212-908-9167
Alexandra Knight, 212-908-9181
or
Media Relations:
Cindy Stoller, 212-908-0526
Email:
cindy.stoller@fitchratings.com 
