NEW YORK - (Business Wire) Fitch rates Horry County, South Carolina's (the county) $62 million General Obligation (GO) bonds, series 2008 'AA-'. The bonds are scheduled to sell competitively on May 6th. Bond proceeds will be used to finance the expansion of the county's detention center and the construction of three libraries. Fitch also affirms the 'AA-' rating on the county's approximately $75.9 million outstanding GOs. The Rating Outlook is revised to Positive from Stable. Additionally, Fitch affirms the 'A' rating on the approximately $12.7 million in outstanding special obligations bonds with a Stable Outlook.
The 'AA-' rating reflects the county's solid financial performance and reserve levels, rapid debt amortization, and prudent leveraging of its tourism-based revenues to finance growth-related capital needs. The county also continues to enjoy economic growth from its sustained popularity as a leisure destination. Despite its success in continuing to attract increasing numbers of visitors, the county's economic concentration in tourism-based economic activity poses a concern. The Positive Outlook reflects the county's recent advances in financial planning including the adoption of a capital improvement plan, limited future capital needs and mutli-year financial forecasting. Continued economic diversification, maintenance of financial strength , strengthened fund balance levels, over the next few years could lead to an upgrade of the rating.
Situated in the northeastern corner of South Carolina, Horry County has more than 50 miles of the Atlantic Ocean coastline commonly known as the Grand Strand. The 2007 estimated resident population of 249,754 is up about 27% since 2000 after growing 37% in the 1990s. The Myrtle Beach area hosts approximately 14 million visitors per year, and on peak days, the population more than triples to nearly 700,000. Most visitors to the area arrive by car, necessitating recent and ongoing state and local investments in the road network. Additionally, enplanements at the county-owned airport increased 34% from 2002-2007, and a sizable terminal expansion is being planned. The June 2008 opening of the new Hard Rock Park, a projected $400 million investment in the community, is expected to further increase tourism. Economic indicators are trending in a favorable direction with decreased seasonality, moderating unemployment and solid gains in retail sales, and tourism-sensitive taxes and fees. Fitch will continue to monitor these indicators in light of the recent and ongoing national economic volatility including increasing gas prices which could negatively affect the county's tourism.
Horry County's financial position remains strong, characterized by ample reserve and liquidity levels. Fiscal 2007 results included a planned $8.1 million drawdown of fund balance for capital projects. However, the county's unreserved fund balance still represented a healthy 24.5% of spending. The county currently expects to end fiscal 2008 with a small deficit, largely due to a shortfall in property transaction-related revenue. The county implemented multi-year financial forecasting in fiscal 2008 which should strengthen the county's ability to react to economic volatility, recent property tax reforms, and any future changes in financial condition.
Debt levels are moderate and incorporate significant county funding of road projects through state infrastructure bank (SIB) loans. Although this debt is supported by a hospitality fee paid predominantly by visitors, the fee is highly leveraged and shortfalls in collections could expose the county to an interception of its state aid entitlement. However, the repayment schedule recently was extended from 2017 to 2022, and a county-retained reserve well exceeds the required minimum, somewhat reducing this risk. Furthermore, revenues from the fee have demonstrated sufficient growth, with growth rates varying from 3.9% to 8.9% over the past three years to meet ongoing debt service. Overall debt, including overlapping debt from schools and incorporated municipalities, a little less than one-half of which is state transportation loans $3,786 per capita and 3.06% of property market value.
The county implemented its first multiyear capital plan this fiscal year, addressing a long-identified risk cited by Fitch. Fitch views the plan positively, as it provides detail on funding sources and uses, as well as the impact of capital projects on the operating budget. Debt levels are expected to remain manageable with approximately $24 million in bonds being issued over the next five years. About $426 million in road improvements will be funded on a pay-as-you-go basis with proceeds of a voter-approved one-cent capital project sales tax that sunsets in 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
Rachel A. Barkley, 212-908-0514
Amy R. Laskey, 212-908-0568
Cindy Stoller, 212-908-0526 (Media Relations)
