Fitch Ratings assigns an 'F1+' rating to Wake County, North Carolina's (the county) approximately $300 million general obligation (GO) bond anticipation notes (BANs), series 2008. The notes are scheduled to sell on Oct. 22, 2008 and mature Oct. 15, 2009. Proceeds will finance the construction of county schools, libraries, and community college facilities. In addition, Fitch affirms the 'AAA' rating on the county's $1.4 billion in outstanding GO bonds. The Rating Outlook is Stable.
The 'AAA' rating and Stable Outlook reflect Wake County's excellent financial performance and management, and strong, diverse economic base. The county benefits from the presence of the city of Raleigh, the state capital; its proximity to Research Triangle Park and major universities; and a broad range of business activity within the county. Capital needs have increased substantially, largely for school construction; enrollment increased at a rapid average annual rate of 4.8% over the past five years and the trend is expected to continue, albeit at a more moderate rate. Debt levels are expected to rise as school needs are funded, and Wake County's capital program and growing debt burden are expected to remain key rating drivers over the near term. Robust economic growth and active, comprehensive planning for capital needs and funding, however, somewhat offset this risk.
The county's population increased 48% in the 1990s and 33% since 2000 to an estimated 832,970 in 2007. The county has a diverse pool of employers, including state and local government, technology, health care, and other services. The county experienced a moderate economic downturn at the beginning of the decade and recovery is evident in lower unemployment rates, good employment growth, and recent expansions of large county employers. The 5.2% county unemployment rate for July 2008, while higher than the 3.7% in July 2007, is still below state and national averages. Wealth indicators across the county are above average, with per capita income roughly 20% above the national level.
Financial management is very strong, adhering to policies and goals that provide a framework for accommodating the county's growing needs. Fiscal 2007 results show an unreserved general fund balance of $102 million, equal to a sound 12.2% of spending; including the reserve required by state statute, the balance rises to 20%. In addition, the county maintains reserves in its debt service fund, which had an unreserved balance of $94.7 million at the close of fiscal 2007. Although these reserves are intended to be used to pay future years' debt service, they are unreserved and could be moved back into the general fund for any purpose at the discretion of the county commission. County officials indicate that they expect to end fiscal 2008 on budget.
The county's adopted capital plan for fiscals 2009-2015 totals $1.3 billion, with debt financing making up 75% of planned funding. Capital needs are higher than the current $1.3 billion, but funding sources for these additional needs have not been identified. The county anticipates seeking voter approval to fund these additional projects. Direct debt levels are expected to increase but should remain moderate, assuming continued population and tax base growth and the county's consistent, sound capital and financial planning. The county's financial planning model for its debt service fund through fiscal 2015 incorporates reasonable growth rates for dedicated revenues, which include a portion of ad valorem and sales taxes and investment income. The planning model assumes several property tax rate increases for capital and operations as well as additional bond referenda.
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