Fitch Rates Bexar County, TX's $19.9MM LT Bonds and Contractual Obligations 'AA+'

AUSTIN, Texas--(Business Wire)--
Fitch Ratings assigns its 'AA+' rating to Bexar County, TX's $14.7 million
limited tax (LT) refunding bonds (the bonds), series 2009, and $5.2 million
public property finance contractual obligations, series 2009, scheduled to price
the week of May 18, 2009 via negotiation. Additionally, Fitch affirms the 'AA+'
rating on the county's outstanding debt consisting of $62.5 million limited tax
bonds, $40.5 million unlimited tax bonds, $125.3 million certificates of
obligation (COs), $146.1 million flood control COs, and $53.5 million
pass-through revenue and limited tax bonds. The Rating Outlook is Stable.

The bonds and contractual obligations are payable from a property tax levy,
limited to $0.80 per $100 taxable assessed valuation (TAV) on all taxable
property within the county. Bond proceeds will be used to refund certain
outstanding debt for interest cost savings. Contractual obligation proceeds will
finance the purchase vehicles, equipment, and other personal property.

The 'AA+' rating reflects Bexar County's large and expanding tax base, improved
financial position, and the general overall health of the diversifying local
economy. Prudent financial stewardship enabled the county to address a recent
imbalance between general fund revenues and expenditures, providing some cushion
for the current economic softening. Additional significant credit factors are
the county's very low direct debt burden and the operating and capital pressures
stemming from a fast growing population. Although residential building activity
has softened, numerous major commercial and defense-related developments are
expected to help sustain the county's positive employment and tax base trends.

Bexar County, with an estimated 2009 population of 1.6 million, is home to San
Antonio. The local economy is broad, consisting primarily of health care,
government, trade, and tourism. The area's health care industry has an estimated
annual economic impact of $10 billion. The county's proximity to Mexico is key
to international business and trade. Approximately 50% of trade between the U.S.
and Mexico passes through the county.

Income levels are generally about 10% lower than the U.S., but only slightly
less than state averages. However, growth in area income over the past few years
has exceeded state and national norms, aided by the metropolitan statistical
area's (MSA) job growth, which has equaled a strong 2.6% or more in calendar
years 2005-2007. Although trending up in recent months due to current economic
conditions, the county's unemployment rate, totaling 6% in March 2009, is below
the state and national average. Taxable assessed valuation (TAV) has surged
recently, posting 15% increases in fiscal 2007 and fiscal 2008, before
moderating slightly to a 9% increase in fiscal 2009. A reported $3.6 billion in
new construction is expected to more than offset a modest decline in residential
reappraisals in fiscal 2010.

The county has restored structural balance to its financial operations,
evidenced by growing general fund operating surpluses in four of the last five
audited fiscal years. Most recently, fiscal 2008 results posted a modest $2.2
million decline in reserves, resulting in an unreserved fund balance of $50.1
million or a solid 15.9% of spending, well above its 10% fund balance policy. In
fiscal 2008, the budget shifted part of the tax rate to the flood control
special tax levy in order to finance drainage projects.

The approved fiscal 2009 budget projected a large $15 million drawdown, reducing
projected reserves to the 10% fund balance level. However, the budget
conservatively appropriated $20 million in contingencies, including $8.7 million
in reserves. Mid-year budget reductions, which included $10 million in cuts plus
a hiring freeze, are expected to reduce the drawdown to $8.4 million. As a
result, reserves are expected to drop slightly to $41.7 million, or 13% of
spending. For fiscal 2010, county officials plan to submit a balanced budget,
which is conservatively based on flat TAV growth, and includes another $10
million in budget cuts, enabling the maintenance of its 10% financial cushion.

About 70% of general fund revenue is derived from ad valorem taxes. Public
safety expenses dominate the general fund budget, with 40% of appropriations for
law enforcement and jail operations. Notably, the fiscal 2008 and 2009 budgets
included partial funding of the estimated annual required contribution for the
county's unfunded liability incurred for post-employment benefits, indicative of
proactive management.

Including the county's recent venue tax bonds, the county's direct debt is very
low at $264 per capita and 0.4% of TAV. Overall debt is relatively high at 6% of
TAV, even after adjusting for state support of local school district debt. Due
to rising property values, such state support has declined substantially,
increasing the effective overall debt levels for the county, which includes 15
different school districts. Including the current offerings, the principal
amortization of property tax-supported debt is average at 56% in 10 years, but
down from previous levels of 76%.

The county is planning to issue up to $680 million over a 10-year period in
non-voter approved COs for drainage improvements planned in conjunction with the
City of San Antonio, the San Antonio River Authority (SARA), and other regional
participants. Previously funded through contractual obligations to SARA, the
county will now issue the debt directly, although SARA will continue to provide
technical assistance and manage the main river project. Given the 10-year
horizon of the drainage projects, Fitch believes that the county's growing tax
base and average amortization of existing principal will help to alleviate some
of the rising debt burden that residents may face.

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, Austin
Jose Acosta, +1-512-215-3726
Gabriela Gutierrez, +1-512-215-3731
Media Relations, New York
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

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