CHICAGO - (Business Wire) Fitch Ratings assigns an 'F1+' short-term rating to the Louisville-Jefferson County Metro Government (Metro Government), Kentucky's approximately $44 million of general obligation (GO) bond anticipation notes (BANs), series 2008A. The notes are scheduled for competitive sale on Dec. 3, 2008, and mature Dec. 1, 2009. The notes are direct GOs of the metro government, payable from taxes levied on all taxable property of the government without limitation as to rate or amount. Proceeds will finance public works improvements, public safety projects, and zoo and library projects.
In addition, Fitch affirms the 'AA+' rating on Metro Government's approximately $227 million in outstanding GO unlimited tax bonds and the 'AA' rating on approximately $61 million of Jefferson County, KY's capital project bonds 2007, series A lease revenue refunding bonds. The Rating Outlook on the bonds is Stable.
The 'F1+' rating on the BANs and long-term GO rating of 'AA+' reflect Metro Government's general credit strengths, including favorable financial position, low debt levels, and limited borrowing needs. The local economy is diverse, although exposure to automobile manufacturing poses some credit risk. However, the broadening of the economy, which includes sizable health care, government, transportation, and service components, lessens the potential impact of the auto industry restructuring.
Following voter approval in 2000, the city of Louisville and Jefferson County merged in January 2003 to form the combined metro government and to replace the city and county governments. The Metro Government area, with a combined population of over 700,000, is the largest and wealthiest in the state. Taxable values have shown steady gains, increasing on average 5% annually since 2003. Economic diversification is evident, both in terms of Metro Government's largest employers and top ten taxpayers. However, Ford Motor Co. maintains two plants in Louisville employing 5,000, down from about 9,000 five years ago. At this time, officials report no major changes in operations at Ford. Reflecting national trends, recent local unemployment rates have spiked from the same period last year.
Audited fiscal 2007 results were positive, with a $3.3 million operating surplus, led by gains in occupational taxes, the largest source of operating support. The total general fund balance totaled $104.2 million or nearly 19% of operating expenditures and transfers out. Unaudited fiscal 2008 results point to a $16.5 million drawdown, reflecting slower revenue growth and increased operating and capital spending. For fiscal 2009, budget growth is the slowest in five years, increasing less than 3%, and includes elimination of 400 vacant positions; since the merger, more than 1,100 positions (or 15% of the city's and county's aggregate workforce) have been cut.
The metro government's manageable capital improvement plan equals $791 million through 2013, with the majority funded through internal sources and state and federal grants. The combined government's direct debt, including lease revenue bonds, totals about $355 million, or about $500 per capita and 0.5% of estimated actual value. About 70% of the GO debt is repaid in 10 years. The metro government is issuing short-term rather than long-term debt now due to recent market disruption, and expects to take out the BANs with long-term bonds when the notes mature.
Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.
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
Melanie A.J. Shaker, 312-368-3143, Chicago
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Email: cindy.stoller@fitchratings.com
