Nov 26 - Fitch Ratings has assigned the following rating to the bond
anticipation notes (BANs) of the Industrial Development Authority of Wise
County, VA (IDA) as follows:
--$15 million Series 2012 Taxable Lease Revenue BANs 'A+'.
The notes are expected to sell via negotiation on Dec. 4, 2012. Proceeds will be
used to refinance the county's 2011 lease revenue bond anticipation notes for
debt service savings.
In addition, Fitch affirms the following ratings:
--$14 million Industrial Development Authority of Wise County public facilities
lease revenue bond anticipation notes (School Projects), series 2011 at 'A+';
--Implied county general obligation (GO) rating at 'AA-'.
Fitch also withdraws its rating on the following bonds as the bonds were never
--$31 million public facilities lease revenue bonds (School Projects), series
The Rating Outlook is Stable.
Public facility lease revenue bond anticipation notes are secured by lease
payments subject to annual appropriation by the county. The notes are also
secured by a lien on the Eastside high school.
KEY RATING DRIVERS
LIMITED LOCAL ECONOMY: The county's private sector economy is dominated by the
coal mining industry, which along with a new coal-fired utility plant result in
very high tax base concentration.
SOLID FINANCIAL PROFILE: Sound financial management and planning have resulted
in healthy reserve levels that consistently exceed the adopted fund balance
NEUTRAL DEBT PROFILE: The overall debt burden is expected to remain stable due
to county plans for pay-as-you-go capital funding and continued adherence to
prudent debt policies.
LIEN ON ESSENTIAL ASSETS: The lease revenue BANs feature solid legal provisions
and are secured by a lien on school buildings, which Fitch considers essential
county property. In the event of non-appropriation, noteholders have the right
to take possession of the leased assets, among other remedies afforded by law.
Wise County is located in southwest Virginia, approximately 50 miles northwest
of Bristol. The county encompasses a land area of 407 miles with a population of
roughly 42,000 that has declined slightly(less than 2%) over the last decade.
CONCENTRATED TAX BASE AND WEAK WEALTH INDICATORS
The economy is limited, with private sector jobs concentrated in coal
production. The natural resources and mining sector accounts for 13% of
employment and construction jobs account for 6.7%. However, construction jobs
have continued to decline as construction at the new Dominion Power hybrid power
plant has been completed. Government employment accounts for 26% of employment,
with retail trade comprising 14% and health care and social services 13%.
Per capita income and median household income of county residents is very low
relative to state and national averages. The county unemployment rate as of
August 2012 was 7.6%, which is well above the state's rate of 5.8% but
comfortably below the national average of 8.2%.
The county's tax base is highly concentrated. The top five taxpayers account for
34% of fiscal 2012 assessed value (AV) and are comprised of coal, gas and
utility companies. The top taxpayer, Dominion Power (IDR 'BBB+' by Fitch),
accounts for a significant 15% of AV. Once the plant's valuation is fully
recognized in fiscal 2015, the estimated total of $1.38 billion will represent
more than 30% of projected total AV.
HEALTHY RESERVE BALANCES
The county's reserve levels remain healthy and continue to exceed the adopted
fund balance policy. As of fiscal 2011 year-end, the county had an unrestricted
general fund balance (committed, assigned and unassigned per GASB 54) of
approximately $21 million or 40% of spending; of the total, $9 million was
committed for school projects and about $12 million was unassigned. The
unassigned balance, at 23% of the spending and transfers out, was well above the
10% policy threshold.
Unaudited fiscal 2012 results show revenues approximately $3 million ahead of
budget, mainly due to higher property taxes, and expenditures in-line with
budget. The county expects to add $1.8 million to its reserves, increasing the
unrestricted balance to nearly $23 million or an ample 44% of expenditures.
CONSERVATIVE 2013 BUDGET
The 2013 budget keeps the tax rate unchanged at a competitive
$0.57 per $100 of AV and includes a $2 million use of committed fund balance for
schools. The budget is conservative as it does not incorporate any additional
property tax revenue from the new Dominion plant above what was received in
NEUTRAL DEBT PROFILE
The county's debt profile is neutral, characterized by an average debt burden,
average principal amortization (48% in 10 years), and limited borrowing plans.
Overall debt totals a moderate 2.3% of market value and a low $1,882 per capita.
Debt service for fiscal 2013 accounts for an affordable 8% of spending, which is
below the county's 10% policy cap. This percentage is likely to drop to below 5%
after the unbudgeted Dominion tax revenues are collected.
The five-year capital plan totals a manageable $30.9 million. The county
anticipates funding 75% with debt ($23 million), 25% from the general fund ($7.6
million) and 1% from grants. Major projects include courthouse renovations and
landfill related projects.
The amount of debt issued to fund the capital plan may change, depending on the
amount of tax revenues from Dominion. Surplus tax revenues from Dominion, after
debt service is paid, are expected to be transferred to the capital reserve
fund. The county projects a $12.3 million capital reserve balance by 2017.
MODEST PENSION AND OPEB COSTS
Long-term liabilities related to employment benefits are not expected to
pressure future operations. As of June 2011, the county's pension program,
provided through the Virginia Retirement System, was adequately funded at 77%
after adjusting the internal rate of return to 7%. The school board's pension
program is funded at a lower 65%. The unfunded actuarial accrued liability for
both programs total approximately $12 million or a very low 0.25% of market
value. The 2012 combined annual required contribution accounted for less than
2.5% of spending.
Under the terms of the financing lease, Wise County will make basic rent
payments to the IDA, subject to appropriation, equal to debt service on the
lease revenue bond anticipation notes. The authority pledges the revenue
received to the trustee for payment of principal and interest. Fitch believes
the essentiality of the financed projects, plus the right of noteholders to take
possession of the assets in the event of non-appropriation, provide sufficient
incentive to appropriate.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
In addition to the sources of information identified in
Fitch's Tax-Supported Rating Criteria, this action was
additionally informed by information from Creditscope,
University Financial Associates, S&P/Case-Shiller Home Price
Index, IHS Global Insight, National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria