Fitch Ratings assigns an 'AAA' rating to the following Loudoun County, Virginia (the county) general obligation (GO) bonds:
--$53.5 million GO public improvement bonds, series 2011 at 'AAA'.
The bonds will be sold via negotiated sale on June 22nd.
In addition, Fitch affirms the following ratings:
--$945.2 million of outstanding GO bonds at 'AAA'.
Fitch also assigns an 'AA+' rating to the following Industrial Development Authority of Loudoun County, Virginia lease revenue bonds:
--$34.7 million public facility lease revenue bonds (Loudoun County Sycolin Road Project), series 2011A;
--$2.75 million public facility lease revenue bonds (Loudoun County Sycolin Road Project), series 2011B (taxable).
The bonds will be sold via negotiated sale on June 7th.
Further, Fitch affirms the following rating of the Industrial Development Authority of Loudoun County, Virginia:
--$ 30.9 million of outstanding lease revenue bonds, series 2003 and 2003A.
The Rating Outlook is Stable.
--Loudoun County (the county) exhibits strong economic indicators, including a wealthy tax base, above-average income levels, a low rate of unemployment, and a highly educated labor pool. The county's economy has fared relatively well during the recent recession due to its proximity to Washington D.C. and the extensive presence of the federal government and its contractors;
--The county continues to adhere to good debt management guidelines, which have allowed overall debt levels to remain moderate. Debt amortization is above average;
--Reserve levels and financial flexibility remain sound supported by prudent fiscal policies and planning;
--The rating on the lease revenue bonds reflects the general credit characteristics of the county and appropriation risk. Leased assets are subject to seizure should the county default on its debt service obligation.
KEY RATING DRIVERS:
--Maintenance of a manageable debt burden despite capital pressures resulting from population growth;
--Continued fund balance stability.
The general obligation bonds are a general obligation of Loudoun County for the payment of which the full faith and credit and taxing power of the county will be irrevocably pledged.
The lease revenue bonds are limited obligations of the Industrial Development Authority of Loudoun County, VA (the authority) and are payable from lease rental payments from Loudoun County to the trustee. Payments are subject to annual appropriation by the county board.
Loudoun County is located in northern Virginia and benefits from its close proximity to Washington D.C (approximately 25 miles). An established business base of federal contractors (more than 900) and high-tech companies leverage Loudoun's highly educated labor pool, technology infrastructure, and an extensive transportation network anchored by Washington Dulles International Airport (Dulles). The County's wealth indicators are well above state and national averages and unemployment remains low at 4.3% as of March 2011. Loudoun's median household income is more than double the national average and 86% higher than the state average.
The Metropolitan Washington Airports Authority is in the process of completing phase I of its Metrorail extension project. Phase II of the project is slated to include three stops in Loudoun, which includes county contributions that have been incorporated in the county's capital improvement plan. However, current estimated cost overruns on Phase II are $1 billion, and as a result significant projected toll road rate increases have put Loudoun's willingness to participate in the project in jeopardy.
Fitch believes that because of the dynamic underlying economy the county's credit quality will not be negatively impacted should the phase II expansion be altered or cancelled.
County finances are well managed, adhering to long-standing policy guidelines, and include detailed planning for capital and operating needs. Fiscal 2010 concluded with a $26.2 million net surplus in the general fund and an unreserved fund balance totaling $173.2 million or 17% of operating expenditures and transfers out. The unreserved fund balance includes a fiscal reserve equal to 10% of general fund operating revenue or $102.9 million. The fiscal reserve may be used in certain circumstances to offset revenue variances, though this has not been done to date.
Local tax and non-tax funding revenue is expected to meet budget in fiscal 2011 and officials anticipate generating a modest $40 million surplus at year-end. The adopted fiscal 2012 budget is balanced without the use of existing reserves and adds $1 million to the general fund balance. Property tax revenues fund approximately 76% of the general fund budget. The real property tax rate was set at $1.285 per $100 assessed value (AV), which represents a 1.5 cent decrease from 2010 calendar year. There are no statutory or charter caps or restrictions on tax levy or tax rate growth.
The overall debt burden is moderate, with debt per capita at $4,327 and debt as a percent of market value at 2.1%. Pressure on the county's debt profile from the sizable $1.18 billion capital improvement plan is minimized to a degree by the wealth of the county's tax base and the county's debt affordability guidelines that restrict debt service to a manageable 10% of spending while ensuring the very rapid amortization of outstanding principal, currently at 67.7% within 10 years. The bulk of capital needs are to alleviate growth pressures within the county's well-regarded public school system. Projected debt financing totals are over $580 million through fiscal 2016, including the current issue, though debt ratios are expected to remain moderate. Funding for the county's portion of the Metrorail project is conservatively budgeted at $315 million in the CIP.
The lease revenue bonds will fund the construction of administrative office space, principally consisting of the Sycolin Road Buildings (the project). The bonds are payable from county payments to the authority that are sufficient to pay debt service, subject to annual appropriation. The authority assigns all of its rights to the trustee for the benefit of bondholders, including its right to receive payments, as well as the proceeds of condemnation or insurance on the Sycolin Road project. In addition, the authority assigns to the trustee its right to reenter and take possession of the project and subsequently sell or lease its interest in the project in the event the county fails to appropriate or pay debt service.
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com, and the National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 16 2010);
--'U.S. Local Government Tax-Supported Rating Criteria' (Oct. 08, 2010).
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
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