Fitch Rts Hudson County, NJ $15.2MM County College GOs Ser 2003, 'A'; Dwngrs Voc Sch GOs to 'AA'

Business Wire, July 21, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--July 21, 2003

Fitch Ratings assigns Hudson County's $15.2 million general obligation (GO) county college bonds, series 2003 'A'. The bonds will sell via competitive bid July 22 and mature serially July 15, 2004-2018. Additionally, Fitch affirms the 'A' rating on the county's $395 million in outstanding GO bonds.

Fitch also downgrades the outstanding rating on the $9.9 million GO vocational school bonds to 'AA' from 'AA+'. The vocational school bonds are secured by the New Jersey School Credit Enhancement Program and the downgrade occurs in conjunction with Fitch's rating action, announced earlier today, downgrading the program's rating. The Rating Outlook for both the county's GO debt and the vocational school bonds is Stable.

The 'A' rating reflects Hudson County's recent rapid expanding economic growth driven by waterfront redevelopment over the last decade and increasing demand for high-end residential property. Commercial attractiveness due to its proximity and accessibility to New York City should maintain diversity in the county's equalized valuation and support continued regentrification outside the two main growth cities of Hoboken and Jersey City. The county maintains manageable debt levels and future capital needs and financial operations remain steady and satisfactory.

Credit concerns include the county's inherent lack of revenue raising flexibility combined with below average income levels, however, 100% property tax remittance from underlying municipal governments remains a credit strength.

Hudson County's economy has been experiencing substantial growth in recent years as the transformation of undeveloped and decaying waterfront property along the eastern riverfront is bringing about increased residential, commercial, and industrial redevelopment. Further, the County's proximity to Newark and downtown Manhattan reflect growth in employment as well as earnings for the construction and finance, insurance, and real estate (F.I.R.E.) sectors. After recessional lows in the early to mid 1990's, property values experienced explosive growth over the last three years, with 2003 showing record annual growth of over 11%. Population in the county continues to rise following a remarkable 10% growth to 608,975 by the 2000 Census from 553,099 one decade earlier. The unemployment rate has declined annually since 1992, and dropped to a record low at 5.6% in 2000; nevertheless, the number of jobless individuals escalated by the end of 2001, reaching Hudson County's current unemployment rate at 7.5% in May 2003. Per capita personal income levels are low relative to the state's high average, but are 98% of the national average.

County finances remain steady and satisfactory. An increasing cash position has helped maintain unreserved fund balance between 5-6% of current fund expenses since 1998, up from 3% in fiscal 1996. The county derives the majority of its revenues from property taxes, remitted 100% by the underlying municipalities. The largest expense items in the county budget include Health and Human Services and Corrections, some of which are reimbursed by state program revenues. The 2003 budget represents almost no growth in expenditures, over 2002, with a reduction in the nominal tax rate to adjust for significant increases in equalized property valuations. Over the last five years, equalized value has grown a strong average of 8.3% annually and the county plans to increase the overall levy a minimal 2-3% annually to capture the strong growth and maintain current levels of financial flexibility.

Debt levels are manageable. Overall debt is $1,889 per capita and 3.76% of market value including underlying debt of the county's major cities. Debt service expenditures present an above average burden on the budget at 12% of expenditures in 2001, however, should remain stable. The six-year capital improvement plan totals $386 million and focuses on a new administration building and vocational and community college improvements with 28% funded from bond proceeds. The county has $22 million in bond anticipation notes (BANs) outstanding to fund a portion of its $33 million financial commitment to the Hudson County Improvement Authority's (HCIA) solid waste system. The county agreed to purchase certain portions of the HCIA solid-waste property in the event the land could not be sold by June of 2001. The HCIA is still marketing the land for sale and current plans call for defeasing the outstanding BANs with proceeds from the future sale.