Fitch Rates Suffolk County, New York's $78.3MM GO Bonds 'AA-'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has assigned an 'AA-' rating to Suffolk County, New York's (the
county) $78.3 million public improvement serial bonds, 2009 series A (the
bonds). The bonds are expected to sell via competitive sale on May 13, 2009. The
bonds are general obligations (GOs) of the county, payable from an unlimited ad
valorem tax pledge. At this time, Fitch affirms the 'AA-' and 'F1+' ratings,
respectively, on the county's approximately $959.3 million outstanding GO bonds
and $395 million of outstanding delinquent tax anticipation notes and tax
anticipation notes. Fitch also revised the Rating Outlook to Stable from
Positive.

The 'AA-' rating reflects the county's broad and diverse economic base which
continues to expand, low debt levels with manageable future capital needs, and
its strong financial management and sound budgetary practices which have enabled
the county to successfully contain expenditure growth and accumulate reserves.
The Outlook revision to Stable from Positive reflects the county's continued
ability to maintain budgetary balance given declining sales tax and property tax
revenues with the ongoing pressure from a high fixed-cost burden in light of the
current economy. The county has prudently accumulated reserves across several
governmental funds to mitigate this condition, but Fitch notes that the county
will begin to draw on a portion of those reserves in fiscal 2009 given the
projected decline of county revenues primarily attributable to a decline in
sales tax receipts. The county's ability to rebuild those reserves to historical
high levels is somewhat limited at this time.

Encompassing the eastern two-thirds of Long Island, Suffolk County's population
grew 6% since the 2000 census to an estimated 1.512 million in 2008. The
county's economy benefits from its proximity to the New York City metropolitan
area as well as its own broad employment base that includes higher education and
health care, defense, retail, and technology, with numerous corporate and
regional headquarters located in the county. Despite the overall economic
downturn, the county continues to benefit from several large new development
projects as well as a strong tourism sector. The county's unemployment rate rose
from a low level of 4.9% in February 2008 to 7.9% for the same period in 2009
but remains below the state and national levels of 8.4% and 8.9%, respectively.
Per capita income levels are above those of the state and considerably above the
national average in 2006, at 117% and 135%, respectively. Despite a small
decline of 1.9% of full valuation in fiscal 2009, the county's large and diverse
tax base has grown significantly since the beginning of the decade. Market value
in the county remains high at $204,180 per capita. Strong financial management
has helped contribute to relatively stable operations despite ongoing pressure
from a high social service burden.

The county estimates that for fiscal 2008 (unaudited), it will have a net
deficit of approximately $78.3 million which will result in an unreserved
general fund balance of $44.1 million, which when added to the county's $126.6
million tax stabilization reserve fund (TSRF), will bring the unreserved general
fund balance to 9% of total expenditures and transfers out. The county had a net
deficit in fiscal 2007 of $47.7 million which resulted in an unreserved general
fund balance of $121.6 million and added to the county's $123.4 million TSRF,
brought the unreserved fund balance to a favorable 11.2% of total expenditures
and transfers out. In early 2008, the county projected a substantial shortfall
of approximately $130 million for fiscal year 2009 and enacted a county
mitigation plan to address the shortfall. Many measures have been implemented to
close approximately $125 million of the projected gap and include the
elimination of vacant positions, an increase of mortgage recording fees as
allowed by the state, as well as an increase in other county fees, the
suspension of county pay-go and other cost saving measures. In addition, the
county securitized a portion of its tobacco settlement receipts received under
the Master Settlement Agreement through the Suffolk Tobacco Asset Securitization
Corporation, using the proceeds to defease approximately $180 million in
outstanding GO bonds of the county over the next five years. An Early Retirement
Incentive program saw participation by 186 employees. In 2008, the county
successfully closed on the sale of its HMO, generating the $18 million
anticipated as revenue in its 2008 budget as well as additional annual revenues
of $3.5 million for the life of the contract.

For fiscal 2009, the county has projected a decline in sales tax receipts of 5%
from fiscal 2008 and has undertaken numerous measures to address the projected
$130 million gap. The county has successfully negotiated concessions from the
majority of its labor unions, revised benefit programs, reduced its overall
workforce and approved a $30 million transfer from the TSRF.

Additionally, the county will receive $50 million of its expected $90 million in
federal stimulus monies in 2009.

Another two-year extension of the additional 1% county sales and compensating
use tax was approved by the New York State Legislature, extending the tax to
Nov. 1, 2009. The county's sales tax revenue in fiscal 2008 declined by $36
million from revised budget forecast and is projected to decline by $100 million
in fiscal 2009 compared to the 2009 adopted budget. The county reports that for
the first quarter of 2009, sales tax receipts declined 10.4% compared to the
same period in fiscal 2008. Fitch believes that the county remains vulnerable to
continued declines in sales tax receipts in 2009.

Debt ratios are low and should remain so given the county's growing tax base,
manageable capital needs, and rapid principal amortization. Overall net debt is
$2,935 per capita and 1.44% of market value. The county's proposed three-year
capital improvement program (CIP) 20010-2012 totals $514.8 million. The county
has completed its actuarial study to determine its long-term liability for other
post employment benefits (OPEB). The unfunded actuarial accrued liability is
$3.9 billion and county officials reported in the 2007 audited financial
statements an ARC in the amount of $386.8 million in order to be compliant and
on schedule with Governmental Accounting Standards Board Statement 45. The
county expects to fund its liability on a pay-go basis. Its net OPEB obligation
is estimated at $303.93 million.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, 'www.fitchratings.com'. Published ratings, criteria
and methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts 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, New York
Ann G. Flynn, +1-212-908-9152
Christopher Hessenthaler, +1-212-908-0773
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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