Fitch Rates Mecklenburg County, NC's $120MM GOs 'AAA/F1+'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns a rating of 'AAA/F1+' to Mecklenburg County, North
Carolina's $120,115,000 variable-rate general obligation (GO) refunding bonds,
series 2009D. The GOs are scheduled to sell via negotiation on July 20, 2009.

In addition, Fitch affirms outstanding county obligations as follows:

-- $1.6 billion GO bonds at 'AAA';

-- $582 million COPs at 'AA+'.

The Rating Outlook for all obligations is Stable.

The short-term 'F1+' rating reflects sufficiency of county liquid resources to
fund any unremarketed puts on its debt. The county maintained an average daily
portfolio balance in fiscal 2009 ranging from 3.7 to 4.7 times the par amount.
In addition, the county's long-term credit rating of 'AAA' implies access to the
capital markets in the event of a remarketing failure. The 2009D bonds will be
issued at an initial Windows interest rate equal to the SIFMA index as of the
date of delivery plus a fixed index spread. All 2009D bonds bearing interest at
a Windows interest rate that have not been successfully remarketed 30 days after
receipt of a Windows optional tender notice will be subject to mandatory tender
210 days after the optional tender notice. The rating does not cover the
potential conversion to another interest rate mode. A failure to pay the tender
price of the bonds on a mandatory tender date will constitute an event of
default under the bond resolution.

The long-term 'AAA' GO rating reflects the strength of the county's broad and
expanding economy, as well as its strong financial performance and management.
The rating also incorporates debt ratios considered high for the rating
category, attributable to a sustained aggressive borrowing program to fund
significant capital needs coupled with the overlapping debt of the city of
Charlotte, NC.

The county recently revised its debt policies to reflect actual debt levels that
were no longer in compliance with the prior policy. Fitch believes the new
policies will provide guidance on an acceptable debt burden going forward. The
county's minimal pension and OPEB liabilities, conservative budgeting for debt
service, and ample reserve levels partially offset concerns regarding the
county's debt profile. The Stable Outlook incorporates Fitch's assumptions that
the debt burden will remain well within ceilings outlined in the county's new
policies, and that variable-rate exposure, including hedged debt, will be
contained at current levels. Changes in these assumptions could result in
negative credit action.

Mecklenburg County's robust financial, professional services and communications
sectors have been supplemented by a growing presence in tourism, high-technology
manufacturing, energy production, and logistics/distribution. Anchored by the
city of Charlotte, the diverse economy includes more than 320 Fortune 500
companies. The county is the second largest financial center in the U.S., with
assets exceeding $1.4 trillion. Fitch will continue to monitor ramifications to
the county of the acquisition of one of its largest employers, Wachovia Bank, by
Wells Fargo & Company, as well as the impact of changes throughout the financial
services industry. Wealth levels are above state and national averages.
Unemployment, which has traditionally been at or below the state and national
averages, has risen in tandem with the state's although more sharply than the
nation's over the past year; the county's 11% May 2009 unemployment rate is
marginally below the state's 11.1% but well above the nation's 9.1%.

Strong long-range financial planning and comprehensive policies have enabled
Mecklenburg County to manage its growth-related financial needs within the
constraints of its budget. Fiscal 2008 reserves remained strong at 20% of
spending despite high debt service spending, which reached 17.7% of total
general government spending. The county projects a drawdown of general fund
balance in fiscal 2009 of no more than $30 million, after nearly $38 million of
transfers out for pay-as-you-go capital financing and capital reserve funding,
and also anticipates maintenance of an undesignated, unreserved general fund
balance equal to at least 8% of spending. The adopted fiscal 2010 budget, 4.5%
below the adopted fiscal 2009 budget, projects modest growth for sales tax
revenues (excluding changes attributable to a State initiated sales tax revenue
and Medicaid expense swap). The budget also anticipates decreased revenues for
building related transactions and eliminates roughly 300 positions, including a
limited number of layoffs. The fund balance appropriation of $46 million is to
be used solely for debt service payments and as partial contribution to the $52
million budgeted for pay-as-you-go capital financing.

The county revised its debt policies in the fall of 2008, in recognition that it
would not be able to adhere to previous targets given sizable upcoming capital
needs. Fitch believes the guidelines embody liberal debt burden and debt service
spending targets relative to other highly-rated entities; the county contends
that the high ceilings provide flexibility and that actual ratios will be below
the guidelines. Additionally, the guidelines institutionalize Mecklenburg
County's maximum permitted unhedged variable-rate debt exposure at 35% of total
debt and do not limit synthetically fixed-rate debt, which Fitch views with
concern as potentially weakening the county's debt profile. Upcoming debt
restructurings will reduce the county's total variable-rate exposure from the
current high of 45% to 31%, while planned fixed-rate issuances will result in a
manageable variable-rate debt total of 22% by fiscal 2014.

Current direct debt ratios are in compliance with the new policy. Overall debt
levels, inclusive of an upcoming $100 million issue, are still moderate but are
inconsistent with such a highly rated credit at $4,063 per capita and 3.6% of
market value. Debt amortization is above average at about 66% in 10 years, in
compliance with county policy. The county has not issued any new capital
authorizations in fiscal 2010 and has not yet considered the additional $1.8
billion of projects requested in the fiscal 2009-2018 capital improvement plan.
Debt capacity modelling within policy parameters projects $150 million of new
debt in fiscal 2011 and $253 million annually in fiscal 2012-2014.

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, New York
Barbara Ruth Rosenberg, +1-212-908-9181
Amy Laskey, +1-212-908-0568
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com

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