Fitch Rates Pickens County, SC $6.7MM GOs 'AA-'

Business Wire, August 27, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 27, 2003

Fitch Ratings assigns a 'AA-' rating to Pickens County, South Carolina's approximately $6.665 million general obligation bonds, series 2003. The bonds are scheduled to sell competitively in mid-September. Fitch also assigns a 'AA-' rating to the county's $6.4 million in outstanding general obligation bonds. This is Fitch's first rating of Pickens County's debt. Proceeds of the series 2003 bonds will fund a library headquarters in the city of Easley. The Rating Outlook is Stable.

The 'AA-' rating is based on the county's significant financial flexibility, as evidenced by high fund balance levels, low property tax rates, and significant pay-as-you-go capital funding; low debt levels; and the stable presence of Clemson University that somewhat offsets the sizable manufacturing component of the economy. Tax base growth has been sluggish the last three years but is expected to show a sizable increase when a revaluation takes effect in fiscal 2006. Officials expect to develop a long-term capital improvement plan during the fiscal 2005 budget process, and do not foresee significant future debt needs.

Pickens County is part of the six-county 'upstate' region in northwest South Carolina, including Greenville County (general obligations rated 'AAA' by Fitch), Spartanburg (general obligations rated 'AA', with a Negative Outlook, by Fitch) and Oconee (general obligations rated 'A+' by Fitch). At 18%, population growth in 1990's was slightly ahead of the state's. The county is mainly rural, but employment is somewhat concentrated in manufacturing, at 20% of county jobs in 2000. Economic growth is likely to be derived from an expansion of the county's industrial base, so employment is likely to remain focused on manufacturing. However, Clemson University, with about 17,000 students, is by far the county's largest employer. The unemployment rate is close to the nation's and below the state's; the labor force showed some weakness in 2001 and 2002 but has recently increased. Per capita personal income is below the state's and well below the nation's.

Debt levels are low and both the county's and overlapping school district's future borrowing plans are limited. Pay-as-you-go capital funding has been $3 million (about 11% of expenditures and other uses) in each of the last two fiscal years. The county is considering debt for a jail complex if sufficient capacity under the state-imposed debt limit is available after the upcoming revaluation. Assessed valuation is expected to grow 20%-30% Officials expect to develop a formal long-term capital plan during the fiscal 2005 budget process.

The county has accumulated large general fund balances while maintaining very moderate tax rates. Fiscal 2002 ended with a $1.9 million operating surplus (7% of expenditures and other uses) and an unreserved general fund balance of 51.5% of expenditures and other uses of funds. Officials expect a modest drawdown in fiscal 2003 for one-time capital needs, and to end the year ahead of budget. The fiscal 2004 budget calls for another modest drawdown but fund balance levels should remain high. A policy adopted by the county council in February 2003 requires a minimum undesignated balance of 10%-15% of the current year's operating budget. The county supports a sewer system developed to attract industrial companies to the county. Although transfers from the general fund now make up more than half of sewer system operating funds, officials expect the system eventually to become self-supporting. A smaller general fund transfer helps support the county's airport.