Fitch Rates Harford County, MD GOs 'AA+'

Business Wire, Jan 21, 2004

Business Editors

WASHINGTON--(BUSINESS WIRE)--Jan. 21, 2004

Fitch Ratings assigns a 'AA+' rating to Harford County, MD's (the county) $27.9 million consolidated public improvement bonds, series 2004.

The bonds, which are scheduled to sell competitively on Jan. 27, are dated Jan. 15, 2004 and will mature serially Jan. 15, 2005-24. Bond proceeds will be used to finance general county and Harford Board of Education capital projects and to redeem approximately $1 million of outstanding bond anticipation notes. Fitch Ratings also affirms the 'AA+' rating on the county's $240 million outstanding general obligation debt. The Rating Outlook is Stable.

The 'AA+' rating reflects the county's consistent record of strong financial management practices, steady economic growth and diversification, and a low tax-supported debt burden with manageable capital needs. Harford County's excellent transportation links to the eastern seaboard, the broadening of mission at the U.S. Army's Aberdeen Proving Ground (APG), and the availability and relatively low cost of developable land have contributed to strong economic expansion over the past several years.

APG now makes up less than 10% of jobs in the county, down from 20% in the early 1990s, evidence of private sector job creation. Growth has been broad-based, encompassing not only traditional county strengths in distribution and manufacturing, but also an increasing number of higher-paying jobs coming from contracts between APG tenants and major research organizations. As a result, personal income growth has outpaced regional, state, and national averages over the past three years. The residential unemployment rate was a low 3.8% in November 2003, reflecting both the relative strength of the regional market and organic job growth within the county.

Financial operations are characterized by maintenance of sound reserves, a conservative approach to budget development, and timely revenue and spending adjustments. Fiscal policies governing multiyear planning, reserve retention, and use of surplus funds for capital and other one-time spending aid in steady operating performance. Unreserved general fund balance at the close of fiscal 2003 totaled $40.2 million, or 12.3% of total spending and transfers, consistent with reserves levels maintained prior to a January 2001 income tax increase that generated sizable surpluses eventually used for pay-as-you-go capital funding.

Fiscal 2004 appropriations are lower than the fiscal 2003 budget, reflecting projections for a weaker revenue environment and spending restraint. Through midyear, the county now estimates a modest surplus based on favorable revenue and spending variances. The fiscal 2005 budget is under development and will be pressured by likely state funding cutbacks, school operations, and employee benefits. The county's pension plans for sheriff and fire employees are significantly underfunded and Fitch will consider funding progress a key element in future rating improvement.

Debt levels are low in part due to manageable infrastructure pressures within a defined growth management area and a dedicated transfer and recordation tax for school construction. Direct debt, including this issue, equals $732 per capita and 1.2% of the market value of taxable property. Debt ratios should remain similar over the next five years as the county implements its $492 million, fiscal 2004-2009 capital plan, which includes approximately $140 million in bond financing. The majority of the capital needs are related to school expansion and renovation. Water and sewer debt carries the county's full, faith and credit pledge, but has been self-supporting from rates and charges for more than 40 years.