Fitch assigns a rating of 'AA+/F1+' to the County of
Mecklenburg, North Carolina, $108,000,000 variable-rate certificates
of participation (2006 Mecklenburg County) (COPs). The COPs are
scheduled to price via negotiation with Wachovia Securities on Feb. 9.
Fitch also affirms the 'AA+' long-term rating on the county's
separately secured outstanding variable-rate COPs (2000, 2001, 2002,
2004 and 2005). The county has entered into a swap agreement to
synthetically fix the interest rate paid on the COPs.
The 'AA+' long-term COPs rating reflects the strong general credit characteristics of the county, the essentiality of the mortgaged property, and sound legal provisions. The long-term 'AAA' general obligation (GO) bond rating recognizes the strength of Mecklenburg County's economic and tax base centered on the city of Charlotte, exceptional financial management highlighted by thorough long-term planning, and manageable debt levels despite rapid growth in population and capital needs. Providing for future operating and capital needs, particularly for schools, without straining the tax base will remain a challenge. This challenge has become more pronounced given the failure of a fall 2005 GO referendum for school capital, and Fitch is concerned that the county may not be able maintain taxpayer support for funding of the school capital program. Since the failure of the referendum for school capital projects, the county has organized a task force, chaired by a former North Carolina governor to determine the basis for the failure and to develop strategies that will enhance the opportunity for future success on such referenda. The results from the governor's task force will be integrated with the recommendations recently released by the Citizens Task Force on Charlotte-Mecklenburg Schools. Given the county's long trend of economic strength, broad financial resources, and demonstrated ability to prioritize and restrain expenditure growth, Fitch expects the county to be able to manage increasing demands. Therefore, Fitch maintains the Stable Rating Outlook on the county.
The COPs are secured by installment payments made by the county to the Mecklenburg County Public Facilities Corporation (the Corporation), a nonprofit corporation consisting of county officials. Installment payments, equal to debt service, are subject to annual appropriation. As additional security the county will convey the mortgaged property consisting of Winget Park Elementary and Hopewell High School to the deed of trust trustee for the benefit of the Corporation. Certificate proceeds will fund the construction of Winget Elementary and the expansion of Hopewell high, as well as partial construction of a courthouse facility. The mortgaged assets are essential to the growing Charlotte-Mecklenburg Schools' plan to comply with a 1999 federal ruling which effectively ended forced busing of students to suburban schools.
The short-term 'F1+' rating assigned to the COPs is based on the support of a liquidity facility, in the form of a standby certificate purchase agreement (SCPA), provided by DEPFA BANK plc, acting through its New York Branch. The SCPA provides for the payment of the purchase price of tendered COPs during the weekly interest rate mode and is sized to cover the principal portion of the purchase price plus 35 days of interest at a rate of 12%, based upon a 365-day year. The SCPA will expire on Feb. 9, 2011 (the initial expiration date), or upon the occurrence of certain events of termination, all in accordance with the terms of the SCPA. The remarketing agent is Wachovia Bank, National Association.
The COPs will be issued initially in the weekly rate mode, but may be converted to a flexible or fixed rate of interest. While in the weekly interest rate mode, interest will be paid on the first business day of each month, commencing March 1, 2006. During the weekly rate, holders may tender their COPs with prior notice. COPs are subject to mandatory purchase: on the certificate payment date during the flexible rate mode, on any conversion date, upon expiration, substitution or termination of the SCPA, and on any certificate payment date selected by the county, with the consent of the bank during the weekly rate mode. The COPs are also subject to optional and mandatory prepayment provisions pursuant to the terms of the Trust Agreement.
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.
The 'AA+' long-term COPs rating reflects the strong general credit characteristics of the county, the essentiality of the mortgaged property, and sound legal provisions. The long-term 'AAA' general obligation (GO) bond rating recognizes the strength of Mecklenburg County's economic and tax base centered on the city of Charlotte, exceptional financial management highlighted by thorough long-term planning, and manageable debt levels despite rapid growth in population and capital needs. Providing for future operating and capital needs, particularly for schools, without straining the tax base will remain a challenge. This challenge has become more pronounced given the failure of a fall 2005 GO referendum for school capital, and Fitch is concerned that the county may not be able maintain taxpayer support for funding of the school capital program. Since the failure of the referendum for school capital projects, the county has organized a task force, chaired by a former North Carolina governor to determine the basis for the failure and to develop strategies that will enhance the opportunity for future success on such referenda. The results from the governor's task force will be integrated with the recommendations recently released by the Citizens Task Force on Charlotte-Mecklenburg Schools. Given the county's long trend of economic strength, broad financial resources, and demonstrated ability to prioritize and restrain expenditure growth, Fitch expects the county to be able to manage increasing demands. Therefore, Fitch maintains the Stable Rating Outlook on the county.
The COPs are secured by installment payments made by the county to the Mecklenburg County Public Facilities Corporation (the Corporation), a nonprofit corporation consisting of county officials. Installment payments, equal to debt service, are subject to annual appropriation. As additional security the county will convey the mortgaged property consisting of Winget Park Elementary and Hopewell High School to the deed of trust trustee for the benefit of the Corporation. Certificate proceeds will fund the construction of Winget Elementary and the expansion of Hopewell high, as well as partial construction of a courthouse facility. The mortgaged assets are essential to the growing Charlotte-Mecklenburg Schools' plan to comply with a 1999 federal ruling which effectively ended forced busing of students to suburban schools.
The short-term 'F1+' rating assigned to the COPs is based on the support of a liquidity facility, in the form of a standby certificate purchase agreement (SCPA), provided by DEPFA BANK plc, acting through its New York Branch. The SCPA provides for the payment of the purchase price of tendered COPs during the weekly interest rate mode and is sized to cover the principal portion of the purchase price plus 35 days of interest at a rate of 12%, based upon a 365-day year. The SCPA will expire on Feb. 9, 2011 (the initial expiration date), or upon the occurrence of certain events of termination, all in accordance with the terms of the SCPA. The remarketing agent is Wachovia Bank, National Association.
The COPs will be issued initially in the weekly rate mode, but may be converted to a flexible or fixed rate of interest. While in the weekly interest rate mode, interest will be paid on the first business day of each month, commencing March 1, 2006. During the weekly rate, holders may tender their COPs with prior notice. COPs are subject to mandatory purchase: on the certificate payment date during the flexible rate mode, on any conversion date, upon expiration, substitution or termination of the SCPA, and on any certificate payment date selected by the county, with the consent of the bank during the weekly rate mode. The COPs are also subject to optional and mandatory prepayment provisions pursuant to the terms of the Trust Agreement.
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.