CHICAGO - (Business Wire) Fitch Ratings assigns an 'AAA' rating to the following Hennepin County (the county), Minnesota's bonds: --Approximately $118 million general obligation (GO) refunding bonds, series 2009B;
--$80 million GO bonds, series 2009C;
--$23 million GO refunding bonds (Build America Bonds- Direct Payment), series 2009D.
The series 2009B bonds are scheduled for competitive sale Nov. 10, 2009 and the series 2009C and series 2009D bonds are scheduled for competitive sale on Nov. 18, 2009. Bond proceeds will be used to finance various capital improvements and to refund existing debt. The county's full faith and credit and unlimited taxing powers secure the bonds. Fitch also affirms the county's approximately $522 million of outstanding GO bonds at 'AAA'. The Rating Outlook is Stable.
The 'AAA' rating reflects the county's prudent and conservative fiscal management and operations, characterized by a strong general fund balance and sizable reserve levels; a diverse and broad economic base with above-average wealth indicators; and affordable debt levels and manageable borrowing plans. Financial operations have experienced some pressures, primarily due to reductions in state and federal funds as well as the effects of the national recession. Additionally, the county remains vulnerable to shortfalls in health and human service operations but has historically controlled costs to counter revenue decline.
Hennepin County, with the City of Minneapolis (GO bonds rated 'AAA', Stable Outlook by Fitch) serving as the county seat, has a diverse and affluent economy that grows in line with national patterns. The county's wealth indicators are relatively high, with per capita income 22% and 33% above the state and national averages, respectively. The county's unemployment rate has risen recently and equaled 7.3% as of September 2009, up from 5.5% when Fitch last rated the county in March 2009, but remains well below the national rate of 9.5%.
The county is a key provider of social services and health care to the indigent and is vested with sizable public safety responsibilities. Historically strong control and management systems have produced a record of favorable operating results and ample reserve levels. For the close of fiscal 2008, the county posted a $10.7 million drawdown, which was slightly less than the county expected. The drawdown reflects a decline in economically sensitive revenues and reductions in state and federal funding. Nonetheless, the general fund balance remains substantial, totaling nearly $150 million, or approximately 30% of expenditures and transfers out and the unreserved balance ended at a healthy $119 million or 24% of spending.
Despite over $16 million in state unallotments in fiscal 2009, the county expects to end the year with break-even results because of concerted spending cuts and budget reductions. Also, while not included in the county's operations since the 2007 reforms, Hennepin Healthcare System depends on the county for funding on an as-needed basis, which may increase going forward. The county has budgeted a 2010 levy increase of 3%, primarily to be used for the Hennepin County Medical Center to help offset volume declines; a total maximum tax rate increase of 4.95% has been approved, but the county does not currently plan to levy the maximum rate unless state unallotments are significantly above budget expectations. Additionally, the county will continue to monitor and reduce department spending and implement operational changes to county services to maintain fiscal balance in fiscal 2010 despite state cuts of over $12 million. Financial pressures will continue through 2011; however, county commissioners and management have demonstrated their ability and willingness to control costs and maintain appropriate reserves consistent with the 'AAA' rating level.
The 2010-2014 capital improvement program totals about $757 million, down from $932 million in the prior five-year plan, as the county downsized projects in response to slowed tax base growth. Approximately 64% of the new five-year capital plan will be financed with bond proceeds. Low direct debt levels are a product of high internal funding for capital projects. The direct debt burden is just 0.6% of market value or $855 on a per capita basis. Overall debt ratios are more moderate at 2% of market value and approximately $2,900 on a per capita basis, reflecting sizable issuances by area school districts as well as the city of Minneapolis.
Additional information is available at www.fitchratings.com.
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Fitch Ratings, Chicago
Dana N. Sodikoff, 312-368-3215
Melanie A.J. Shaker, 312-368-3143
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com
