NEW YORK - (Business Wire) In the course of routine surveillance, Fitch Ratings affirms the 'A' rating on Tioga County, NY's $5 million in outstanding general obligation (GO) refunding bonds, series 2001. The Rating Outlook is revised to Stable from Negative.
The 'A' rating reflects the county's sound financial position and low per-capita debt burden, supported by significant pay-as-you-go capital spending from a dedicated half-cent sales tax and rapid amortization. Credit concerns include a moderate level of taxpayer concentration and a narrow economic base concentrated in manufacturing. The Outlook revision reflects the county's financial turnaround over the last several years as fund balances grew steadily, the imposition of a half-cent sales tax increase, statewide limitations on Medicaid expense growth, and recent economic development investment. Fitch expects the county's experienced and conservative management team to maintain sound reserve levels through prudent expense management in light of the potential for an economic slowdown that could reduce property and sales tax revenues.
Beginning in fiscal 2004 (December 31 year-end), the county ran three consecutive general fund surpluses, building the unreserved fund balance to a comfortable $11.3 million, or 18.7% of spending at the end of fiscal 2006. The driving factors included a half-cent increase in the sales tax adopted in December 2003 and dedicated for general operations, and a statewide cap on annual growth in local Medicaid costs implemented by the state legislature in 2006. Unaudited results for fiscal 2007 indicate another strong general fund surplus of $1.3 million that would further increase the unreserved fund balance to 21% of spending. While the fiscal 2008 budget projects a $4 million appropriation of fund balance, the county tends to budget conservatively. Certain revenues, including sales taxes, are already coming in slightly ahead of budget.
Tioga County, with an estimated population of 50,453, is located in the state's Southern Tier, along the border with Pennsylvania. Census estimates indicate a stable to slightly negative trend with average annual declines of 0.5% since 2000. Lockheed Martin's Owego facility is the county's largest employer with a staff of approximately 4,000 white-collar workers. Recent economic developments in the county include the opening of a Best Buy distribution center in 2005, and of the Tioga Downs Racetrack and Casino in summer 2007. Tioga Downs recently reached a modified revenue-sharing agreement with the state, and is now considering an expansion that could include an on-site hotel. While the unemployment rate remains moderate, the gap between county and state unemployment narrowed, and actually reversed in 2007 with the county's unemployment rate (4.6%) being slightly higher than the state's (4.5%), for the first time in the last decade.
The county's tax base remains moderately concentrated, although economic development has led to a limited amount of growth and diversification. In addition, the rising price of natural gas has led to considerable recent investment in exploring previously cost-prohibitive sources in the Southern Tier. The county reports that landowners have signed leases worth at least $2,000 per acre in recent months with gas exploration and drilling companies, compared to several hundred dollars per acre just a year ago. The additional income flowing into the community could help offset some of the losses anticipated as the national economic slowdown continues.
Capital needs are met largely with available cash as the county dedicates 0.5% of its 4% sales tax for capital spending, including debt repayment on GO bonds. In addition, the county, as part of a coalition with surrounding counties, securitized its share of tobacco settlement funds. Proceeds are dedicated to fund bridge repairs. The county has no immediate plans for debt issuance. However, a tightening state budget environment could lead to cuts in transportation aid, potentially requiring the county to issue small amounts of debt of $1 million or less to help fund capital projects. Direct debt ratios are a low $114 per capita and 0.25% of taxable market value, so ample capacity remains.
Tioga County completed an actuarial valuation of its OPEB liabilities at the end of 2007. The report estimated a $73 million unfunded liability and the county plans to limit its funding to the annual pay-go amount ($1.8 million in 2007), rather than meeting the actuarially required contribution of $7.3 million. In recent years, the county negotiated changes in benefits for new hires including extending the required years of service to 15, and limiting the county's responsibility for premiums.
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Fitch Ratings, New York
Eric Kim, 212-908-0527
Christopher Hessenthaler, 212-908-0773
Christopher Kimble, 212-908-0226 (Media Relations)
