Fitch Rates Onondaga County, New York's $35MM 2006A GOs 'AA+'; Outlook Stable
By: Financial News
Fitch Ratings assigns an 'AA+' rating to Onondaga County, NY's (the county) $35 million general obligation (serial) bonds, 2006 series A. The general obligation (GO) bonds are scheduled for competitive bids on Nov. 14, 2006, with Government Finance Associates and Fiscal Advisors serving as the county's co-financial advisors. Bond proceeds will finance various capital projects, including Onondaga Community College improvements. Fitch also affirms the 'AA+' rating on the county's approximately $325 million outstanding GO bonds. The Rating Outlook is Stable.
The 'AA+' is based on the county's sound financial position, low direct debt burden following the use of tobacco securitization proceeds to retire outstanding debt, as well as a diversifying economy as growth in service sector employment has outpaced declines in manufacturing jobs. The county's solid management practices are reflected in conservative budgeting and adherence to formal fund balance and debt affordability policies. Commitment to conservative fiscal management enabled the county to maintain its strong financial position in the face of escalating pension, social service, and employee benefit costs that have negatively impacted all counties in the state since the beginning of the decade. Although these budgetary pressures contributed to draws on reserves in 2001-2004, the county's efforts to raise the recurring revenue base, coupled with a statewide cap on Medicaid spending by counties, has resulted in a return to structural balance and the restoration of reserves in 2005 and 2006.
Onondaga County is a diverse economic center of central New York. Although population levels declined by 2.3% during the 1990s, the trend appears to be moderating, with a minimal 0.1% decline since the beginning of the decade based on 2005 census estimates. The employment base is bolstered by the presence of the higher education section; the county is home to Syracuse University with a student enrollment of approximately 18,600. Although the area has been negatively impacted by declines in manufacturing employment, including the transfer of Carrier Corporation's manufacturing operation from the area, these declines have been offset by growth in service sector employment. Employment in the areas of wholesale and retail trade is also anticipated to benefit from the planned expansion of the existing regional mall into a multipurpose venue to be named DestiNY USA. Unemployment rates have consistently been below state and national levels and registered 4.2% in August 2006. Income levels are slightly below state and national levels.
Following draws on reserves in 2001-2004 and operations marked by a dependence on one-time revenue sources, fiscal 2005 results show a $13.6 million general fund surplus, restoring fund balance levels to 11.3% of revenues, above the county's policy floor of 10%. Restoration of structural balance was largely due to a 1% increase in the countywide sales tax rate, effective in September 2004. The fiscal 2006 budget was balanced with a 2.9% increase in the property tax levy and no appropriation of general fund balance as a revenue source. Based on third quarter projections, the county anticipates a $9 million general fund surplus, with positive results due to below budget spending on Medicaid and wages and above budget interest earnings.
Overall debt ratios are low at $899 per capita and 1.8% of fair market value. The county's approximately $325 million outstanding GO debt is offset partly by the $80 million of tobacco settlement securitization proceeds used to refinance outstanding county GO debt. Borrowing needs remain manageable given the current financing arrangements for the court-ordered Onondaga Lake cleanup. Lake remediation projects, which are more than halfway complete, are proceeding in a timely manner and are currently under budget. However, risk remains that if water quality violations are still incurred after completion of the required projects, further county spending for additional projects will be mandated to achieve compliance. The six-year capital improvement plan for 2007-2012 totals $609 million, about 51% of which will come from county borrowing. Projects related to the Onondaga Lake clean-up account for 51% of the planned spending.
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