Fitch Rates Gwinnett County Water & Sewerage Auth, Georgia's $272MM Revs 'AAA'

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AAA' rating to the Gwinnett County Water and Sewerage
Authority, Georgia's (the authority) approximately $247.8 million revenue bonds,
series 2009A and $24 million taxable revenue bonds (Recovery Zone Economic
Development Bonds), series 2009B. The bonds are scheduled to sell competitively
on Oct. 7 with proceeds expected to fund certain capital projects of the
authority and refund outstanding parity bonds.

At this time, Fitch also affirms the 'AAA' rating on $947.2 million in
outstanding water and sewage authority revenue bonds, and $210 million in other
debt supported by the County's full faith and credit, including $119.7 million
in bonds issued by the Development Authority of Gwinnett County. The Rating
Outlook is Stable.

The authority's 'AAA' bond rating reflects the security provided by a pledge of
the County's full faith and credit and taxing power. Under an amended lease
agreement, the bonds also are secured by a subordinate pledge of net revenues
from the County's water and sewerage system. The County's high credit
fundamentals include strong financial management demonstrated by consistently
large fund balances, prudent policies, good economic growth and diversity, and
substantial pay-as-you-go (pay-go) financing of capital projects leading to a
low debt burden. While the Rating Outlook is presently Stable, Fitch remains
concerned regarding a recent court decision that will eliminate by 2012 the
county's current water supply from Lake Lanier unless congressional approval is
obtained or a long-term, interstate water supply agreement is formulated to
allow the authority to maintain the current water supply source. The ruling
gives the county, as well as other interested parties, three years to resolve
the matter. As such, Fitch will closely monitor the county's progress in
addressing the court ruling and continue to evaluate the impact on the
authority's and the county's overall credit profile.

Gwinnett County is located in northeast Georgia, approximately 25 miles
northeast of downtown Atlanta. Similar to other counties in the Atlanta
metropolitan statistical area (MSA), the county has realized explosive
population growth over the years, increasing by 65% in the 1990s and by an
estimated 30% since the 2000 census to 789,500 in 2008. The county's economy
includes a well-diversified mix of manufacturing of both traditional and high
technology products, health care, other services and retail. Similar to the
entire Atlanta MSA, the state, and the nation, the county's unemployment rate
has experienced a sharp increase since the onset of the recession, rising from
5.6% at the close of 2008 to 9.5% in July 2009. Income levels, while declining
over the last several years, remain slightly better than the state and the
nation. Like much of the nation, the number of single family building permits
issued in the county declined year over year beginning in 2007 and have
continued falling through the first half of 2009. While home foreclosures more
than doubled in 2008 compared to the prior year and have continued rising
through 2009 year-to-date, water and sewer charge collection rates are still
reportedly unchanged at about 98%.

The authority provides water and sewer service on a retail or wholesale basis to
the majority of the County's population and customers in some neighboring
counties. The system's significant challenge, shared with other water providers
in the region, is allocating a limited long-term water supply among a growing
number of users. Conservation efforts stemming primarily from prolonged
drought-imposed water use restrictions impacted revenue growth in fiscal years
2007 and 2008, although debt service coverage remained adequate, and previously
adopted rate increases have ensured strong operating margins and a good level of
liquidity. The authority's net revenues covered debt service by a solid 1.7
times (x) in fiscal 2008, and liquidity was equal to about 160 days of cash on
hand. Favorably, annual rate increases have already been approved through fiscal
2015 and are expected to yield debt service coverage levels in excess of 2.0x
beginning in fiscal 2010. Including state loans, debt service coverage is
forecast to range from 1.5x-1.9x. The county's rates are in line with those of
other area providers and remain affordable for the service area's rate-payers.

The county's financial position is strong, as financial operations continue to
benefit from prudent financial management, sound reserve policies, and ample
financial flexibility. Following healthy operating surpluses in fiscal years
2006-2007, the county realized a $38 million operating deficit in fiscal 2008,
reducing the unreserved, undesignated fund balance to $39.6 million, equal to
almost 9% of spending and transfers out. The operating shortfall was primarily
attributable to a delay in the receipt of state revenues as well as an
unbudgeted appropriation of general fund balance to help finance the
construction of a 10,000-seat stadium to host the Atlanta Braves' Triple-A
affiliate. The county's unreserved general fund balance, which includes an
operating reserve, remains well in excess of its policy requiring at least 16.7%
(equal to two months) of general fund appropriations on hand. To offset the
impact of current economic conditions and a softening on the county's tax
digest, the county implemented a cost management study that prompted $33 million
in expense reductions and increased several fees to generate about $5 million in
recurring revenue beginning in fiscal 2009.

The county's tax-supported debt levels are low, with the majority of capital
needs funded through current revenues, including proceeds of a special local
option sales tax (SPLOST) extended by voter approval in 2008 through March 2014.
Overall debt is equal to about $1,600 per capita and 1.7% of market value. The
county's multi-year capital plan is sizeable at approximately $2.3 billion, with
about half of the plan funded through a SPLOST. The balance of the county's
capital improvement plan (CIP) will be financed through debt issuance, grants
and pay-go funding. Due in part to the large contraction in home building,
SPLOST revenues declined modestly in 2007, then fell by almost 9% compared to
budget in fiscal 2008, and has dropped an additional 7% through year-to-date
2009. The authority's 2009-2014 CIP totals $675 million, with approximately 30%
of the plan funded with debt issuance, including about $150 million from the
current financing. The balance of the plan will be funded substantially through
pay-go and from state and federal grants.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings, New York
Christopher Hessenthaler, 212-908-0773
Amy R. Laskey, 212-908-0568
or
Media Relations:
Cindy Stoller, 212-908-0526
Email: cindy.stoller@fitchratings.com

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