Fitch Ratings assigns a 'F1+' rating to Cobb County, Georgia's (the
county) $87 million general obligation (GO) tax anticipation notes
(TANs), series 2008. The notes are scheduled to sell competitively on
March 25 and will mature on Dec. 31, 2008. Fitch also affirms the 'AAA'
rating on the county's $58 million in outstanding GO debt. The Rating
Outlook is Stable.
The assignment of Fitch's highest short-term rating of 'F1+' to Cobb
County's TANs is based on the county's long-term credit characteristics,
as well as the satisfactory coverage of repayment in the last month of
the calendar year, the availability of additional borrowable resources,
and the county's conservative budgeting practices. The 'AAA' GO bond
rating reflects strong financial management, sound fund balances, low
debt levels, and a diverse economic base, as well as the county's
proximity to Atlanta. The TAN borrowing is 14.5% higher than the 2007
borrowing and represents approximately 17% of the county's combined Fire
and General Fund budgets. The increase in the TAN borrowing is needed to
cover an approximately $20 million decrease in cash that will be used to
initially fund a recently established trust needed to begin meeting the
county's other post-employment benefits (OPEB) liability, which Fitch
views favorably. Future TAN borrowing is expected at similar levels and
should continue to decline as a percentage of spending as the county's
budget grows annually.
Although the county operates on a fiscal year ending Sept. 30, property
taxes, which represent 58% of projected cash flow receipts net of
short-term borrowing for fiscal 2008, generally become delinquent after
Oct. 15. Cobb County uses short-term cash flow borrowing to meet cash
flow requirements in the earlier part of the fiscal year.
Projected receipts and accumulated balances for fiscal 2008 cover TAN
principal and interest a satisfactory 2.0 times (x). Coverage of the
2007 borrowing by actual receipts was a strong 2.5x, greatly exceeding
the 1.8x coverage projected at the time of the previous TAN borrowing.
The $72.3 million projected ending cash balance after TAN repayment in
calendar 2008 equals 15% of total projected cash flow receipts,
providing an adequate cushion against fluctuations in actual receipts or
disbursements. Additional flexibility is afforded by borrowable
resources in the county's water and sewer fund, which ended fiscal 2007
with approximately $75 million in unrestricted assets, and the ability
to adjust the timing of interfund transfers throughout the year.
As part of the vibrant Atlanta metropolitan statistical area (MSA), the
county exhibits healthy economic diversification and above-average
wealth levels. The county's population grew an estimated 13% from 2000
to 2007, in addition to the 36% growth experienced between 1990 and
2000. A diverse group of major corporations and military-related
operations provide the majority of private sector employment in the
county. WellStar Health Services, Inc. and Lockheed Martin Corp. are the
largest county private employers, with 9,838 and 6,617 employees,
respectively, in 2007. The county's unemployment rate, measured at 3.9%
in December 2007, continues to trend below the Atlanta MSA, the state
and the nation remain and income levels comfortably exceed the Atlanta
MSA, state, and national figures.
The county's relatively low tax rates, solid assessed valuation (AV)
growth averaging 7.3% annually over the past five years, and prudent
budgeting practices have contributed to a strong financial position. A
nominal operating deficit in the county's general fund in fiscal 2007
was due in large part to a continued practice of funding capital
projects on a pay-as-you-go basis. The county's unreserved, undesignated
general fund balance declined to $36.7 million, though at 11.1% of
expenditures and transfers out, remained at a solid level. A $12.3
million unreserved, undesignated fund balance in the county's second
operating fund, the fire district fund, is equal to a strong 16.2% of
spending and transfers out and provides additional operating financial
flexibility. The general fund continues to subsidize the county's solid
waste disposal enterprise fund, which finished fiscal 2007 with a $53.5
million accumulated retained earnings deficit. A tipping fee increase in
2004 did not close the structural gap in the solid waste enterprise fund
as planned, compelling the general fund to continue subsidizing the
system. Nonetheless, the unreserved general fund balance is expected to
remain strong, above the county's policy of keeping the unreserved
general fund balance policy at one-tenth of budgeted expenditures.
Sound capital planning that includes a substantial amount of
pay-as-you-go financing and rapid debt amortization has resulted in very
low debt levels. Overall debt, which includes the current offering and
overlapping units, is low at $601 per capita and 0.50% of market value.
In September 2005, county voters narrowly approved a 1% Special Purpose
Local Option Sales Tax (SPLOST) to finance various capital projects,
including a new jail, a new courthouse, replacement of the countywide
800 mhz radio system, and transportation improvement programs. The
passage of the SPLOST follows two unsuccessful attempts since 1998 and
will provide funding for much-needed capital needs and should relieve
some potential stress on the general fund. Additional GO debt issuance
of approximately $15 million is planned for later in calendar 2008.
Funding for the county's pension remains somewhat weak for the rating
level at 68% in fiscal 2007, though management has implemented various
measures to improve the funding ratio over the coming years. The
county's unfunded OPEB liability is estimated at $177 million with an
annual required contribution (ARC) expected to be about $15 million;
current pay-go costs total approximately $8.1 million. Fitch views
favorably county officials' actions to alter benefits for some existing
employees and all new employees, and establish a trust to begin funding
the liability.
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.
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