NEW YORK - (Business Wire) Fitch Ratings has assigned an 'AAA' rating to the following Sedgwick County, Kansas' (the county) bonds: --Approximately $6.3 million general obligation (GO) bonds, series 2009A;
--$3.7 million taxable GO bonds, series 2009B (Build America Bonds - Direct Payment);
--$18.8 million GO refunding bonds, series 2009C.
The bonds are scheduled for a competitive sale on Nov. 4, 2009. The series 2009A and B bonds will fund various public improvement projects. The series 2009C bonds will current refund all or a portion of series 1998 and 1999 outstanding bonds for debt service savings. In addition, Fitch affirms the 'AAA' ratings on the Sedgwick County Public Building Commission's approximately $83.9 million outstanding revenue bonds and the county's approximately $70.2 million outstanding GO bonds. The Rating Outlook is Stable.
The 'AAA' rating reflects the county's strong credit fundamentals, including conservative management practices and solid reserve levels, low direct debt ratios and manageable borrowing plans, and consistent, albeit slowing, tax base growth. While the county's economic base has experienced some broadening, notably in the health care, education and government sectors, aircraft manufacturing remains a large and important component of area employment and recent layoffs have led to a spike in the normally low unemployment rate of the county. While financial results remain solid, further economic erosion could negatively impact operations and is a key credit consideration.
Located in south-central Kansas, Sedgwick is the state's second most populous county and ranks second in terms of economic output. County population continues to record modest growth. Wichita, the county seat, is a noted center of aircraft manufacturing. The county's economic indicators are somewhat mixed. The tax base continues to grow although at a slower rate than in the past. Historically strong property valuation growth slowed in 2009 as values increased only by about 1% over 2008 levels;,lower than the five-year average growth rate of about 4%. Although the economy has broadened, aircraft manufacturing remains an important component of the area's employment base. Layoffs at several top employers in the county including Cessna Aircraft Company, Hawker Beechcraft Corporation, and Boeing IDS Wichita have led to the increase in unemployment rates. The county's September 2009 unemployment rate was 8.8% compared to 4.6% when Fitch last reviewed in November 2008. While high, the county's unemployment rate remains below the U.S. average of 9.5%.
Financial performance has benefitted from strong management systems, including extensive long-term financial and capital planning efforts. The county implemented a 20% unreserved general fund policy (on a budgetary basis) in 2007 and is committed to maintaining fund balances in accordance with this policy. Fiscal 2008 resulted in a slight deficit, primarily due to the $5 million forgivable loan to Cessna Aircraft Company for a new facility. Unreserved general fund balance totaled $60.3 million or 36% of operating expenditures and transfers out in fiscal 2008. The fiscal 2009 budget calls for the planned drawdown of $19.1 million, primarily related to budget contingencies which will not be realized. According to management, fiscal 2009 will actually result in a $3 million surplus, mostly a result of the repayment of the forgivable loan by Cessna, since the aircraft manufacturer cancelled plans to build their new facility. Fitch expects fiscal 2010 through 2012 to be difficult years for the county and management is currently projecting operating shortfalls through the next three years mostly due to decline in revenues, particularly the sales/uses tax, and rise in expenditures, precipitated by the increased demand for services from the county. Nevertheless, even with several years of projected shortfalls to the operating budget, reserve levels are expected to remain at or above the county's policy of maintaining 20% of the budget in the unreserved general fund balance. Failure to adhere to the fund balance policy could result in downward pressure on the rating.
Low direct debt levels are a product of high internal funding for capital projects and rapid principal amortization rate. The direct debt burden is just 0.6% of market value and $387 on a per capita basis. Overall debt ratios are more moderate at 6% of market value and $3,791 on a per capita basis, reflecting sizable issuances by the city of Wichita and area school districts. The 2009-2014 capital improvement program (CIP) totals approximately $174 million, about $74 million of which is expected to be bond financed.
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
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Email: cindy.stoller@fitchratings.com
