Fitch assigns a rating of 'F1+' to the $125,000,000
Hamilton County, Tennessee, general obligation commercial paper bond
anticipation notes, series 2006. The short-term 'F1+' rating on the
notes is based both on the internal liquidity support provided by
Hamilton County, TN (the county) and the external liquidity support
provided by SunTrust Bank in the form of a standby note purchase
agreement (the standby). Fitch affirms the 'AA+' rating on the
county's $125,510,000 in outstanding general obligation bonds. The
short-term 'F1+' rating will expire on the earlier of Sept. 13, 2013,
the expiration date of the standby, or upon any prior termination of
the standby. Goldman, Sachs & Co. is the dealer for the notes. The
sale date for the notes is expected to be Sept. 19, 2006.
Deutsche Bank National Trust Company, as the Issuing and Paying Agent (the IPA), is directed to request an advance under the standby whenever proceeds of the sale of commercial paper notes are insufficient to pay the principal on maturing commercial paper notes. The standby provides a commitment to cover the principal amount of notes issued, up to a maximum of $125,000,000. The county is responsible for the payment of interest due on maturing commercial paper obligations.
The notes will be issued at par, with interest due at maturity. Following the occurrence of an event of default under the standby, the bank may direct that no additional notes be issued. In addition, the standby may be terminated at the option of the bank, upon the occurrence of specified events.
The 'AA+' long-term rating reflects Hamilton County's stable, diverse economy; strong financial management and planning that result in healthy general fund reserves and low property tax rates; and moderate direct debt levels. The economy benefits from continued successful redevelopment of central business district properties, and the county's strong financial position is underpinned by continued overall growth in tax revenues. Unemployment has risen slightly but remains consistently below state and national averages.
Hamilton County contains the City of Chattanooga (general obligations rated 'AA' by Fitch) and is located in the southeastern corner of Tennessee. It serves as the regional economic center of a four-county area spreading across the Georgia state line and is approximately equidistant from Atlanta and Nashville. The Chattanooga area has an above-average proportion of employment in the manufacturing sector relative to national levels. However, its employment is well diversified and stabilized by the Tennessee Valley Authority and a large higher education sector in the city and county, including the University of Tennessee at Chattanooga and the Chattanooga State Technical Community College. Enterprise South, an industrial park, provides a significant amount of developable land. Income levels are average.
The county's strong management practices include policies for maintaining operating fund reserves, rapid debt retirement, pay-as-you-go capital support from annual revenue, and superior financial reporting and budgeting. The county has consistently maintained unreserved general fund balances, ranging from 29.1%-35.2% of expenditures during fiscal years 2002-2005, although the balance has declined over that time. Given the county's conservative budgeting practices, healthy reserves, and an expected increase in fiscal 2006, the county's recent drawdowns are not a concern for Fitch.
The county has a policy of retiring debt within 15 years of issuance unless a specific revenue source supports debt service. As a result, 81.5% of principal will amortize within the next 10 years. In fiscal 2005, the debt burden was a low 6.1% of total annual expenditures and has been consistently maintained at that level. The county's next general obligation issuance, which will redeem the CP now offered, is scheduled for fiscal 2008. Most of the needs included in the county's $158 million five-year capital improvement plan will be funded with this issue.
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.
Deutsche Bank National Trust Company, as the Issuing and Paying Agent (the IPA), is directed to request an advance under the standby whenever proceeds of the sale of commercial paper notes are insufficient to pay the principal on maturing commercial paper notes. The standby provides a commitment to cover the principal amount of notes issued, up to a maximum of $125,000,000. The county is responsible for the payment of interest due on maturing commercial paper obligations.
The notes will be issued at par, with interest due at maturity. Following the occurrence of an event of default under the standby, the bank may direct that no additional notes be issued. In addition, the standby may be terminated at the option of the bank, upon the occurrence of specified events.
The 'AA+' long-term rating reflects Hamilton County's stable, diverse economy; strong financial management and planning that result in healthy general fund reserves and low property tax rates; and moderate direct debt levels. The economy benefits from continued successful redevelopment of central business district properties, and the county's strong financial position is underpinned by continued overall growth in tax revenues. Unemployment has risen slightly but remains consistently below state and national averages.
Hamilton County contains the City of Chattanooga (general obligations rated 'AA' by Fitch) and is located in the southeastern corner of Tennessee. It serves as the regional economic center of a four-county area spreading across the Georgia state line and is approximately equidistant from Atlanta and Nashville. The Chattanooga area has an above-average proportion of employment in the manufacturing sector relative to national levels. However, its employment is well diversified and stabilized by the Tennessee Valley Authority and a large higher education sector in the city and county, including the University of Tennessee at Chattanooga and the Chattanooga State Technical Community College. Enterprise South, an industrial park, provides a significant amount of developable land. Income levels are average.
The county's strong management practices include policies for maintaining operating fund reserves, rapid debt retirement, pay-as-you-go capital support from annual revenue, and superior financial reporting and budgeting. The county has consistently maintained unreserved general fund balances, ranging from 29.1%-35.2% of expenditures during fiscal years 2002-2005, although the balance has declined over that time. Given the county's conservative budgeting practices, healthy reserves, and an expected increase in fiscal 2006, the county's recent drawdowns are not a concern for Fitch.
The county has a policy of retiring debt within 15 years of issuance unless a specific revenue source supports debt service. As a result, 81.5% of principal will amortize within the next 10 years. In fiscal 2005, the debt burden was a low 6.1% of total annual expenditures and has been consistently maintained at that level. The county's next general obligation issuance, which will redeem the CP now offered, is scheduled for fiscal 2008. Most of the needs included in the county's $158 million five-year capital improvement plan will be funded with this issue.
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.