Jan 28 - Fitch Ratings assigns an 'AA+' rating to the following King County,
Washington new debt issuance:
--Approximately $73.9 million limited tax general obligation (LTGO) bonds series
The bonds are scheduled to price on Feb. 19, 2013 via competitive sale. Proceeds
will be used to retire outstanding bond anticipation notes and provide interim
financing for county solid waste projects.
In addition, Fitch affirms the following ratings:
--$154 million outstanding unlimited tax general obligation (ULTGO) bonds at
--$1.6 billion outstanding LTGO bonds at 'AA+'.
The Rating Outlook is Stable.
The bonds are general obligations of the county, secured by an irrevocable full
faith, credit, and resources pledge to levy an ad valorem tax sufficient
(together with all other legally available monies) to pay debt service. The LTGO
pledge is constrained by property tax levy growth of 1% per year, plus new
RESILIENT ECONOMY: King County retains a sound economic base due to its role as
a regional economic center and above-average wealth and income levels.
Employment levels remain below pre-recession peaks but have seen steady
improvement over the past year. Assessed values continue to face downward
pressure, but recent home price increases offer signs of recovery in the local
SOUND FINANCIAL POSITION: General fund balances and cash levels are healthy and
increased substantially in fiscal 2011. The county's finances remained stable in
2012 and the recently adopted 2013 budget is balanced.
STRONG MANAGEMENT: The county's strong management is reflected in its commitment
to long-term planning, adherence to council-adopted financial management
policies, and low debt burden.
LIMITS ON REVENUE GROWTH: The county is property tax dependent in a state with
restrictive property tax levy growth limits and recent significant taxable
assessed value (TAV) declines.
STRUCTURAL IMBALANCE: The county will be challenged to maintain structural
balance over the longer term due to ongoing cost pressures and constraints on
revenue growth. Recent efforts to address this imbalance through efficiency
measures have shown positive results but could prove difficult to maintain on a
DIVERSE ECONOMIC BASE; SOME RECOVERY EVIDENT
King County benefits from a diverse economy and tax base that encompasses almost
29% of the state's population. The county includes the Pacific Northwest's
largest city, Seattle, and serves as a regional economic center. Wealth and
income levels are well above national averages, and TAV is high at $162,000 per
King County performed better than many regions nationally in the recent
downturn, but its economy continues to face challenges. Employment levels
sustained steady but modest improvements throughout 2012, yet remain below
pre-recession peaks. Assessed values continue to suffer the impacts of the
housing decline, although an uptick in home values has been evident in recent
months. County management projects a fourth consecutive year of TAV declines in
2013 that would raise cumulative losses since 2009 to nearly 20% of assessed
PROGRESS IN ADDRESSING STRUCTURAL IMBALANCE
King County's general fund fared better during the recent downturn than economic
indicators might suggest. Total revenues increased at a modest average annual
rate of 0.5% between 2007 and 2011, while the county impressively held spending
stable. In addition to ongoing savings from labor cost reductions achieved
during this period, the county has sought to reduce costs by 3% per year on an
ongoing basis through efficiency improvements. Key efficiency gains to date have
included reductions in employee health insurance costs, office space
consolidation, and the centralization of information technology services.
Such efficiency efforts respond to legal limits on growth in property tax, the
general fund's largest source of revenue, and are intended to address the
structural imbalance between projected revenue and expenditure growth. The
county was able to eliminate a preliminary budget gap of $24.6 million for 2013
without service reductions or fund balance use, but Fitch believes out-year gaps
may prove challenging to manage. While not anticipated, a material change in the
county's financial flexibility and reserves relative to historical levels could
pressure the current rating and/or Outlook.
STRONG RESULTS FOR 2011
General fund balances improved substantially in 2011 after a small increase in
2010 and three prior years of declines. Unrestricted fund balance (the sum of
committed, assigned, and unassigned fund balance per GASB 54) reached 20% of
general fund spending ($127.7 million) due to conservative budgeting, a planned
increase in reserves, and reserve fund consolidation. Balance sheet liquidity is
satisfactory, as the county closed fiscal 2011 with general fund cash and
investments of $90.1 million, equivalent to almost two months of general fund
spending and more than three times total liabilities. Management expects to
report increased fund balances for the fiscal year ending Dec. 31, 2012, which
Fitch considers likely based on the county's track record of conservative
LOW DEBT; MANAGEABLE PENSIONS
The county's debt burden remains low with net direct and overlapping debt at
1.7% of market value. Amortization is quicker than average with 69% of net
direct debt repaid in 10 years.
Pension liabilities are manageable and reflect historical strong funding levels
for most state-sponsored plans. Other post-employment benefit liabilities are
relatively minor as most retirees must pay for the cost of their participation
in the county's group insurance plan.