Published: October 25, 2010
Fitch Rates Louisville-Jefferson County Metro Government, KY's GO Bonds 'AAA'; Outlook Stable
NEW YORK - (BUSINESS WIRE) - Fitch Ratings assigns an 'AAA' rating to the following
Louisville-Jefferson County Metro Government, Kentucky (the metro
government) obligations:
--$36,320,000 general obligation (GO) refunding bonds, series 2010D;
--$6,520,000 taxable GO refunding bonds, series 2010E.
The bonds are scheduled for competitive sale on Oct. 27, 2010. Proceeds
will be used to refund series 2001A and series 2002 A & B bonds.
In addition, Fitch affirms at 'AAA' the ratings on the metro
government's outstanding $415.6 million in GO debt.
The Rating Outlook is Stable.
RATING RATIONALE:
--Despite a deep and diverse local economy, the current unemployment
rate remains above the national average.
--The metro government displays several positive socioeconomic
indicators, including continual population growth and above average
wealth levels.
--The debt burden is low with rapid amortization coupled with limited
future debt needs.
--The metro government has maintained acceptable unrestricted financial
reserves despite generating nominal operating deficits after transfers
in recent years.
KEY RATING DRIVERS:
--Management's continued ability and willingness to actively manage
expenditures to mirror its potentially volatile occupational tax, which
has fluctuated with economic cycles.
--Deterioration in the unreserved/undesignated balance, which may lead
to downward rating pressure.
SECURITY:
The GO bonds are secured by the metro government's full faith and credit
and its ad valorem taxing power, without limitation as to rate or amount.
CREDIT SUMMARY:
The city of Louisville and Jefferson County merged in January 2003 to
form the combined metro government, replacing the former city and county
governments. The metro government area, with a combined population of
over 700,000, is the largest and wealthiest in the state. Population
gains and the relatively stable economic picture contributed to steady
growth in property values over the past decade. However, gains in
taxable value have slowed in recent years with increases in residential
foreclosures and tax delinquencies. The local economy is diverse with
United Parcel Service Inc. serving as the area's leading employer with
over 20,000 employees, followed by the Jefferson County Public Schools
with almost 14,000. Humana Inc., whose workforce has more than doubled
over the past nine years to 9,854 employees, is now the third largest
employer. In addition to the healthcare, transportation and government
sectors, the manufacturing sector accounts for a greater percentage of
total employment than the national average, which may be contributing to
the metro government's elevated unemployment rate (10.2% in August 2010)
as compared to the national average (9.5%).
Financial performance has been generally stable, benefiting from strong
management and solid economic growth. In fiscal 2009, however,
occupational taxes, which comprised 54% of total general fund revenues
declined by 2.6% compared to 2008 actual results, or 4% below original
budgeted expectations. In total, revenues declined 2.9%, but growth in
personnel spending as well as costs related to wind and ice storms
offset numerous mid-year spending cuts. Thus the metro government ended
fiscal 2009 with a 1.2% general fund shortfall after transfers. For
fiscal 2010 the metro government estimated its general fund revenues
were be slightly ahead of budget. Occupational tax receipts are
projected to be marginally below budget ($2.3 million or 0.8%) but will
be offset by a one-time property tax payment and charges for service.
The metro government projects it ended the fiscal year with a roughly
$65 million unreserved general fund balance. The ending balance includes
$3.2 million of a formerly disputed $4 million payment from the Federal
Emergency Management Agency related to natural disasters with reasonable
expectation that Louisville will receive at least the majority of the
remaining contested amounts. Financial performance for the first quarter
of fiscal 2011 is positive with occupational tax collections up 7.6%
compared to the year prior.
Aggregate debt levels remain low at $1,196 per capita and 1.1% of full
market value. Debt amortization is rapid with 70% of principal retired
within 10 years. The metro government's debt burden is nominal ($727 per
capita and 0.7% of true value) partially due to annual transfers of
general fund operating surpluses to fund various pay-go capital
projects. The annual capital transfers ($9.9 million in fiscal 2009) are
a potential source of financial flexibility as the metro government has
limited pressing capital needs.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in the
Tax-Supported Rating Criteria this action was additionally informed by
information from Creditscope, LoanPerformance, Inc., University
Financial Associates, and IHS Global Insight.
Applicable Criteria and Related Research:
'Tax-Supported Rating Criteria,' dated Aug. 16, 2010.
'U.S. Local Government Tax-Supported Rating Criteria', dated Oct. 8,
2010.
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
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OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE.
Fitch Ratings
Primary Analyst:
James Mann, +1-212-908-9148
Director
Fitch,
Inc.
One State Street Plaza
New York, NY 10004
or
Secondary
Analyst:
Ann Flynn, +1-212-908-9152
Senior Director
or
Committee
Chairperson
Amy Laskey, +1-212-908-0568
Managing Director
or
Media
Relations:
Cindy Stoller, New York, +1-212-908-0526
cindy.stoller@fitchratings.com
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