Fitch Rtes Gwinnett County Devel. Auth. (Georgia) $14.5MM Revs 'AAA'; Outlook Stable

2008-09-05 00:45:02 -

- Fitch Ratings assigns an 'AAA' rating to the Development Authority (the authority) of Gwinnett County (the county), Georgia's approximately $14.5 million revenue bonds (Gwinnett Recovered Materials Processing Facility Project), series 2008. The bonds are scheduled to price Sept. 10, 2008 through competitive sale. Bond proceeds will finance the construction and development of a recovered materials processing facility. Fitch also affirms the 'AAA' rating on the authority's approximately $121.6 million in outstanding parity debt. The Rating Outlook is Stable.

The authority's 'AAA' rating reflects the security provided by a pledge of Gwinnett County's unconditional and absolute obligation to make contractual payments to the authority through its full faith and credit and unlimited taxing power. The county's obligation to make the contractual payments is pursuant to an intergovernmental agreement between the county and the authority. The county's high credit fundamentals include strong financial management demonstrated by consistently large fund balances, prudent management policies, good economic growth and diversity, and substantial pay-as-you-go financing of capital projects leading to a low debt burden.

The current financing will provide funds for the purpose of constructing, developing and equipping a recovered materials processing facility (the facility) needed to meet the county's expanding role in solid waste collection. Beginning Jan. 1, 2009, the county will be implementing county-wide, mandatory, residential garbage collection and increasing its recycling efforts. To that end, the authority will be financing the construction of the new facility to handle the expected increase in volume with regard to recovered materials. The proposed facility is expected to be approximately 60,000 square feet with an estimated handling capacity of 130,000 tons per year.

Although not pledged to bond repayment, debt service is expected to be paid from a residential solid waste fee imposed on residential property owners. The fee will be included on residents' property tax bills. The county expects the revenue collected from the solid waste fee to be sufficient to meet annual debt service on the current offering.

Gwinnett County is located in northeast Georgia, approximately 25 miles northeast of downtown Atlanta. Similar to other counties in the Atlanta metropolitan statistical area (MSA), the county has realized explosive population growth over the years, increasing by 65% in the 1990s and by an estimated 30% since the 2000 census to 776,380 in 2007. The county's economy includes a well-diversified mix of manufacturing of both traditional and high technology products, health care, other services and retail. A 10,000-seat stadium being constructed to host the Atlanta Braves Triple-A affiliate is scheduled to open in the spring of 2009 and is expected to have a favorable economic impact on the county.

Similar to the entire Atlanta MSA, the state, and the nation, the county's unemployment rate has experienced a sharp increase through the first half of 2008, rising from 3.8% at the close of 2007 to 5.7% in July 2008. Income levels, while showing decline over the last several years, remain equal to the state and slightly below the nation. The number of single-family building permits issued in the county in 2007 totaled almost half of the number issued in the prior year, and home foreclosures reportedly increased by 33% compared to 2006 with more recent data suggesting a continued rise through the first half of 2008. Due in part to the large contraction in home building, special local option sales tax (SPLOST) revenues declined modestly in 2007 after years of robust growth, and from May 2007 through May of the current year sales tax collections are reportedly down by approximately 10%.

The county's financial position is strong, as financial operations continue to benefit from strong taxable property growth, prudent financial management, and sound reserve policies. Despite healthy operating surpluses in fiscal years 2006 and 2007, the county's unreserved, undesignated fund balance declined by approximately $6.1 million to $48.6 million, equal to a solid 11.6% of spending and transfers out, as the county prudently appropriated fund balance toward meeting its other post employment benefits (OPEB) liability; however, the obligation was met with current-year revenues. The county's total general fund balance remains well in excess of its policy requiring at least 16.7% (equal to two months) of general fund appropriations on hand. To meet increasing service demands, the county plans to continue appropriating fund balance in the near term in addition to considering long-term revenue-enhancements and cost-cutting measures. The adopted fiscal 2008 budget is approximately 8% higher than actual fiscal 2007 spending and transfers out.

The county's tax-supported debt levels are low, with the majority of capital needs funded through current revenues, including proceeds of a SPLOST extended by voter approval in 2004 through March 2009. Overall debt is equal to about $2,100 per capita and 2.4% of market value. The county's multi-year capital plan is sizeable at approximately $2 billion, with about one-fourth of the plan funded through debt issuance. The balance of the county's capital improvement plan (CIP) will be financed through grants and pay-as-you-go funding, including proceeds from the current SPLOST.

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