In the course of routine surveillance, Fitch Ratings affirms the 'AA-' rating on Culpeper County's (the county) approximately $9.8 million general obligation (GO) bonds and the 'A+' rating on the Industrial Development Authority (IDA) of the Town of Culpeper, VA's approximately $54.2 million (County of Culpeper, Virginia School Facilities Project) public facility lease revenue bonds. The Rating Outlook for both is Stable.
While the underlying rating of the public facility lease revenue bonds was assigned on Aug. 4, 2005, the rating was not reflected on Fitch's web site. With this affirmation the full rating history is now available on the Fitch web site.
The 'AA-' rating on the GO bonds incorporates the county's sound financial position, stable economy with additional prospects for growth, currently moderate debt burden, and substantial capital needs due to significant population growth over the last several years. The 'A+' rating on the IDA of the Town of Culpeper, VA's public facility lease revenue bonds reflects the general credit characteristics of the county, the essentiality of the leased assets, and the satisfactory legal provisions of the lease financing.
The GO bonds are secured by an unlimited ad valorem tax assessed on all taxable property within the county. The lease revenue bonds are secured by lease rental payments, subject to annual appropriation, to be made by the county to the IDA, which assigns its rights to receive such payments to a trustee. As additional security for the county's obligations, the IDA grants, under a leasehold deed of trust, a lien and security interest in the new high school and corresponding county-owned land. Together, the construction cost value of the school and the land exceed the par amount of the lease revenue bonds. Upon a failure of the county to appropriate its rental payments in full, the trustee, acting on behalf of the IDA, could take possession of the assets and sell or re-let them.
Culpeper County is located west of Interstate-95 in central Virginia, approximately equidistant from Washington, D.C. and Richmond. The local employment base consists of light manufacturing, retail, and government jobs, and nearly one-half of the labor force commutes outside the county for work. Although the unemployment rate has historically been below both state and national averages, current indicators show that it is moderately above state and national levels. The county's population has grown about 4.2% annually since 2000, requiring the county to plan strategically to meet future infrastructure needs. To date, resources have been managed well, with sound fund balance reserves maintained and regular pay-as-you-go financing keeping debt levels in the moderate range.
The county's capital improvement plan for fiscal 2009-2013 totals approximately $176 million, with 37% devoted to school capital projects, 17% for facilities construction and renovation, 3% for airport improvements and the remaining 44% primarily dedicated to public safety and public works projects. Additional borrowing of approximately $139 million is planned through 2013, debt financing for almost 80% of the CIP, while pay-as-you go capital spending will account for 15% and other smaller sources will cover the remainder of the cost. Fitch will continue to monitor the impact of future debt issuances on the county's debt profile.
The county's financial profile remains sound despite property tax revenue declines resulting from increased foreclosures in the county and substantial pay-as-you-go capital spending. Audited fiscal 2008 results included a $10.5 million reduction in total general fund balance, which decreased the unreserved fund balance from $33.3 million in fiscal 2007 to $21 million, or 27% of total general fund revenues and in compliance with the county's undesignated general fund reserve policy of 10%-15% of general fund revenues. The planned drawdown was primarily a result of one-time capital outlays, as well as increased expenditures in education due to the opening of two new schools in the area. The fiscal 2009 budget projected a 2.2% decline in sales tax revenues and year-to-date performance is underperforming relative to budget. To address these declines the county has implemented a hiring freeze and further reduced its sales tax revenue estimates for fiscal 2010. For fiscal 2009, the county anticipates a drawdown of general fund balance of approximately $3.5 million to continue funding one-time capital improvements but the county will remain within its general fund reserve policy limits. In fiscal 2010 the county expects an 11%-12% decline in taxable assessed values for real property and plans to increase the real estate tax rate to $0.69 from $0.61 to maintain the property tax levy at the current level. Fitch will continue to monitor the county's sales tax collections, property tax revenue and expenditures going forward.
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.
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