Fitch Rates Carroll County, Maryland's $67MM GOs 'AA+'; Outlook Stable

The 'AA+' rating reflects the county's strong financial position, continued adherence to prudent fiscal policies, comprehensive long-term planning, the steadily growing tax base, and moderately low debt levels. Changes to the county's adequate public facilities ordinance slowed residential development, and officials seek to preserve open space through the purchase of easements. The county retains ample financial flexibility through additional revenue-raising capacity and solid reserves, which should bode well during a time of economic and financial pressure. Debt levels are expected to remain moderate due to manageable capital needs and rapid amortization of principal.

Located in north-central Maryland, Carroll County's proximity to the employment centers of Baltimore, MD and, to a lesser extent, Washington, D.C. has contributed to its strong population growth over the past two decades. Since the 2000 census, this largely residential community has grown 12.2%, which is double the state's 6.1% growth rate for the same period. In response, county officials are continuing their effort to encourage sustainable growth by reviewing the current employment zones and growth management strategies. Although the county's unemployment rate of 6% for September 2009 represents an increase year-over-year, this economic indicator remains comfortably below the regional, state, and national averages. With concentrations in the construction and retail trade sectors, the county's employment base is somewhat limited; economic development efforts remain focused on adding depth and breadth to local job opportunities.

Financial operations and reserve levels are sound, and guided by prudent policies and long-term planning efforts. Fiscal 2008 results showed a net surplus of $4.5 million and an unreserved fund balance of $45.9 million, equal to 14.2% of expenditures, transfers out, and other uses, which is the measure typically used by Fitch, although it differs from the county's policy. Unaudited results for fiscal 2009 show a nominal $2.9 million draw on fund balance given the county's more than $26 million contribution to pay-as-you-go capital project funding during the year. The fiscal 2010 budget was balanced with recognition of the strained economic climate, and officials have already begun to address revenue revisions and forecasts in the fiscal 2010-2016 operating plan. The county maintains financial flexibility by not levying common transfer and building excise taxes and by imposing an income tax rate below the state-mandated cap.

While the county has made efforts to increase its commercial tax base, the property tax base remains largely residential. Despite slower growth in recent years due to the broader housing market correction, taxable assessed valuation (TAV) growth remains solid. Fitch believes that important factors such as a triennial property assessment and a Homestead Tax Credit are likely to somewhat mitigate fiscal pressure from the housing market over the longer term.

Overall debt ratios, including obligations of underlying municipalities, are moderately low at roughly $2,200 per capita and 1.8% of full market value. Fitch expects that the county's debt burden will remain manageable given steady tax base and population growth, extensive pay-as-you-go funding, and rapid retirement of existing debt. The county's capital improvement program totals roughly $450 million over fiscal years 2010-2015, representing a decrease in size from the prior plan as the county has almost entirely addressed capacity issues in the school system. The current plan is primarily focused on land conservation, enterprise fund projects, road improvements, and school needs. Slightly over half of the plan will be funded with GO bonds, with the balance to come from pay-as-you-go sources and state and federal grants.

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