TEXT - Fitch rates Fulton County, Georgia water & sewer revs

Wed Feb 27, 2013 3:12pm EST

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Feb 27 - Fitch Ratings assigns the following rating to Fulton County,
Georgia's (the county) bonds:

--Approximately $219.8 million water and sewerage revenue refunding bonds, 
series 2013, 'AA-'.

The bonds are scheduled to sell the week of March 5 via negotiation. Bond 
proceeds will be used to refund certain outstanding bonds of the county for 
interest savings without extension of maturity.

In addition, Fitch affirms the following ratings of the county:

--$247 million (pre-refunding) outstanding water and wastewater revenue bonds, 
series 2004 at 'AA-';

--$246 million outstanding water and sewerage revenue refunding bonds, series 
2011 at 'AA-'.

The Rating Outlook is Stable.

SECURITY

The current offering and outstanding parity bonds are secured by a first lien on
net revenues of the combined water and sewer system (the system). The series 
2013 bonds will also be secured by a cash-funded debt service reserve fund.

KEY RATING DRIVERS

HIGH LIQUIDITY; LOW COVERAGE: The county's very strong cash balances provide a 
great deal of flexibility and an important offset to below average debt service 
coverage (DSC). Fitch expects coverage to remain at lower levels given the lack 
of planned rate increases.     

ELEVATED DEBT TO DECLINE: Key debt ratios are elevated but are expected to 
decline through 2017 as the county's capital improvement program (CIP) largely 
focuses on system renewal. The county plans to fund its needs on a pay-as-you-go
basis which should help to improve debt ratios over time. 

SOUND ECONOMIC FUNDAMENTALS: The county's combined water and sewer system 
provides an essential service to a broad and diverse service area.

RATING SENSITIVITY

STRONG CASH BALANCES KEY: Declining liquidity could lead to a lowering of the 
rating in light of expectations of below-average DSC through the forecast 
period.

CREDIT PROFILE

The water and sewer systems serve approximately 70,600 and 88,200 customer 
accounts, respectively, located primarily in the northern and southern parts of 
the county. Residents living within the city limits of Atlanta (the city) are 
served by the city's water and sewer system. The combined system's customer base
is diverse, made up primarily of residential users. The largest users accounted 
for just 2.7% of total revenues in 2011. Growth in the system's service area was
moderate for much of the prior decade given that the county is mostly built-out.


SUFFICIENT WATER AND SEWER CAPACITY

Treated water is purchased from the Atlanta Fulton County Water Treatment Plant 
(Atlanta/Fulton plant), which the county shares ownership of with the city. The 
county also sells water on a wholesale basis to the city of Roswell and to 
Forsyth County. Raw water is drawn from the Chattahoochee River just south of 
Lake Lanier and is treated by the Atlanta/Fulton plant, which has treatment 
capacity of 90 million gallons daily. 

Fulton County's demand increased in 2010 to about 60% of its available treatment
capacity following severe drought conditions and water use restrictions in 2008 
and 2009. Nevertheless, county officials expect remaining capacity will be 
sufficient to meet customer demands for the foreseeable future given the lack of
immediate growth pressures. 

Wastewater collection and treatment is provided directly through the county's 
system and indirectly through treatment and disposal contracts with neighboring 
governments. The county's six wastewater treatment plants are reportedly in good
operating condition and are well maintained, although the county is moving 
forward with enhancements to certain facilities to alleviate capacity 
constraints as the treatment plants are not interconnected. All required permits
are reportedly in place and no regulatory issues exist. 

LOWER DEBT SERVICE COVERAGE OFFSET BY CASH BALANCES

The system's overall financial performance remains adequate for the given rating
level, although debt service coverage (DSC) is considered relatively narrow 
compared to peer utilities. For 2011, DSC was 1.3x and improved to 1.5x for 
unaudited 2012 - the county's fiscal year coincides with the calendar year. 
Through the fiscal 2017 forecast period, DSC is expected to be in the 1.3x-1.8x 
range given no additional debt or rate increase plans and relatively flat 
consumption and operating expense levels. 

The county's below-average DSC is mitigated by historically high cash balances, 
which have exceeded 700 days cash since 2007. For unaudited 2012, days cash 
improved from the prior year, rising to 786 days. The maintenance of high levels
of liquidity through the forecast period will be key in light of relatively low 
DSC expectations. 

DEBT PROFILE TO IMPROVE FROM PAY-GO CIP

The 2013-2017 CIP totals $195 million and is expected to be paid entirely from 
surplus revenues and cash reserves. The CIP focuses largely on repair and 
renewal needs, which provides a good deal of flexibility for the county in 
determining capital outlays. While the county has adhered to pay-go funding in 
recent years (the last new money issuance was in 2004), debt levels are moderate
to high. Per capita and per customer debt levels are both over 1.8x the 'AA' 
categorical median, but should moderate somewhat over the next five years with 
no new planned issuances. Somewhat offsetting debt concerns, principal 
amortization and debt to net plant assets are in line with 'AA' category 
medians.

SOUND ECONOMIC FUNDAMENTALS

Fulton County has a diverse economic base benefiting from Atlanta's role as the 
state capital and center of a broad regional economy. The county serves as a 
corporate headquarters for large employers including Coca-Cola, Bell South, Home
Depot, and Delta Air Lines. Hartsfield-Jackson International Airport 
(Hartsfield), the world's busiest airport, is also located within the county. 

Despite the presence of Atlanta and its numerous large employers, the county's 
December 2012 unemployment rate of 9.3% is higher than the state and national 
averages of 8.8% and 7.6%, respectively.  Nevertheless, Fitch believes the 
presence of various state, federal, health and educational institutions bolsters
the county's longer-term economic prospects. Wealth levels in the county are 
favorable at 10%-15% above the state and nation.
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