MOODY'S AFFIRMS Aaa RATING ON $296 MILLION IN PRE-REFUNDING PARITY DEBT OUTSTANDING
Forsyth (County of) GA
Refunding Revenue Bonds, Series 2011
Expected Sale Date
NEW YORK, Jan 10, 2011 -- Moody's Investors Service has assigned a Aaa rating to Forsyth County Water and
Sewerage Authority's (GA) $28.13 million Revenue Refunding Bonds, Series 2011.
Concurrently, Moody's has affirmed the Aaa rating assigned to $296.2 million
in outstanding parity debt, including $159 million issued through the Forsyth
County Water and Sewerage Authority.
Pursuant to a lease contract, ultimate bondholder security for the bonds is also
provided by the county's absolute and unconditional unlimited general obligation
pledge. The bonds are additionally secured by a pledge of net revenues of the
water and sewerage system. The assignment of Moody's highest-quality rating
reflects the county's sizeable tax base and diverse economic profile, low debt
levels, and a slightly below-average rate of debt retirement. The rating also
incorporates the sound operating performance of the fiscally-independent water
and sewerage system and a satisfactory General Fund financial position that is
expected to improve following a sizable prior period adjustment in fiscal 2009.
Bond proceeds will be used to refund approximately $28 million in outstanding
debt with no extension of maturity and an expected net present value savings of
$2.1 million or 8.7% of the refunded principal.
NORTHERN ATLANTA TAX BASE REMAINS STRONG DESPITE RECESSION
Located approximately 30 miles north of the City of Atlanta (G.O. rated
Aa2/negative) along the GA Highway 400 corridor, Forsyth County has experienced
accelerated population and tax base expansion during the past decade, supported
by both the transportation network into the city as well as the availability of
high-end residences and access to lakefront property. The county's population
has increased 77.3% since 2000 to 174,520 in 2009, following 123%
population growth during the prior decade. The corresponding residential
and related retail development has expanded the full market value of the
county's tax base to $23.7 billion as of 2010, which includes a 4.2% decline in
2010 as a result of the real estate market downturn and the impact of Act 163
(House Bill 233), approved by the General Assembly during the 2009 legislative
session. The law establishes a three-year moratorium period during which no
growth is permitted in the assessed value of real property (tax years
2009-2011) and specifically permits assessed values to decline, a factor that is
compounded by separate legislation (Senate Bill 55) requiring foreclosures to be
counted as fair market sales for property reappraisal beginning with tax year
2009. Notwithstanding the impact of the legislation, the county will continue to
benefit from its strategic location in the Atlanta metro region, which retains
longer-term growth prospects despite the current recession, given its role as a
leading national economic hub for trade and transportation.
Officials report that new residential construction permits increased by 32.5% in
2010 compared to 2009 and the county had 8 new economic development projects in
2010, creating approximately 484 new jobs. The county's historically
agricultural economy has retained several stable employers including Tyson
Foods, Inc. (Sr. Unsec. Ba2/positive) and American Proteins. Countywide
unemployment has remained below state averages, including an October 2010
jobless rate of 7.7% below the 9.6% statewide level. Wealth levels are above the
State of Georgia (G.O. rated Aaa/stable) averages, with the county's 1999 per
capita income at 137.6% of the state median and 2008 full value per capita at
$136,041, among the highest in the state.
COUNTY FUND BALANCE LEVELS REMAIN ADEQUATE AFTER CAPITAL INVESTMENT AND PRIOR
Moody's believes that the county's sound fiscal practices and history of
managing growth-related budget challenges will uphold the current financial
position, which has remained strong despite recent declines for the use of fund
balance for one-time capital expenditures and a prior period adjustment in
fiscal 2009. By policy, the county is required to maintain the General Fund
balance at a level equal to three months' (25%) operating expenditures; in
practice, fund balance has remained solidly above this level through fiscal
2008, equaling an average of 50.3% of annual revenues from fiscal 2004 to 2008.
During fiscal 2008, the county reported a $6.5 million General Fund deficit
driven by a shortfall in taxes and investment income. In fiscal 2009, an $11.6M
prior period adjustment of fund balance along with a modest $800,000
deficit resulted in a year-end fund balance of $14.7 million or 17.5% of
revenues, notably below the county's policy. The prior period adjustment was
caused by management's decision to eliminate five internal service funds and to
write-off $10 million in interfund receivables from the Capital Projects Fund.
Based on projections of fiscal 2010 operating performance, management expects to
report nearly $5 million in revenues over budget due to conservative budgeting
of property and sales taxes. Although the county implemented broad expenditure
controls, midyear appropriations, including $1.6 million to the sheriff's
department, is expected to mitigate excess revenues and officials project year
end fund balance to be level to the prior year. The fiscal 2011 General Fund
budget includes a $1.3 million contingency and a $575,000 addition to fund
balance, demonstrating management's conservative budgeting practices and
commitment to increasing fund balance reserves. The budget is also based on a
0.9 maintenance and operation millage increase, maintains the county's pay
freeze and includes 4 furlough days. Officials expect to reach their stated
target of 25% fund balance within approximately three years, which Moody's
believes will be met..The current affirmation of the Aaa rating
incorporates Moody's view that the county has returned to structural balance
with the fiscal 2011 budget and that through strong management, will grow its
reserves to levels more commensurate with its rating category.
DEDICATED REVENUES SUPPORT CAPITAL NEEDS
Moody's expects the county's direct debt burden to remain low, given ongoing tax
base expansion and dedicated revenue streams that support outstanding debt
obligations. The county's direct debt burden is equal to 0.6% of full valuation
and excludes $159 million (54% of all G.O.-backed debt) of bonds supported by
the net revenues of the county's water and sewer enterprise. The county's total
debt burden, equal to 2.3% of full valuation, reflects the substantial
overlapping indebtedness of the separate Forsyth County School District (G.O.
rated Aa1). Amortization is slightly below average, with 40.1% of principal
retired within 10 years, inclusive of enterprise-backed debt.
Moody's believes that the county's debt position will remain manageable given
the currently-low debt burden and expectations that the majority of future
capital funding will be provided by the dedicated 1% Special Purpose Local
Option Sales Tax (SPLOST) and water and sewerage system borrowing, which is
self-supporting through system revenues. The county expects to collect
approximately $132 million under the current SPLOST through June 2013. Officials
expect to renew the current SPLOST in 2011 and, if the renewal is
successful, issue G.O. bonds for the construction of a new courthouse and jail.
The water and sewer system plans to issue up to $30 million in the near term for
an expansion of the current system.
Approximately $30.3 million (10% of G.O.-backed debt) in G.O. bonds issued
through the Forsyth County Water and Sewerage Authority are in a variable rate
demand mode, for which the county has a standby bond purchase agreement with
Dexia Credit Local (Sr. unsecured A1/stable) for the life of the bonds.
The county is party to a synthetic variable rate swap agreement with
Morgan Guaranty Trust Company of New York related to the county's
proportional share of the Georgia Municipal Association's Series 1998
certificates of participation for an equipment lease pool financing. The
swap agreement has a total notional amount of $7.8 million (matching principal
currently outstanding) and will expire on June 1, 2028, upon maturity of the
certificates. Moody's believes that the county's debt and swap portfolio is
manageable and does not pose a material credit risk.
WHAT COULD MOVE THE RATING DOWN:
-Deterioration of reserves driven by structurally imbalanced operations or to a
level that is inconsistent with other Aaa rated municipalities
-Significant declines in tax base
2009 population: 174,520
Fiscal 2010 full valuation: $23.7 billion
Fiscal 2010 full value per capita: $136,041
Unemployment rate (October 2010): 7.7%
1999 Median Family Income: $74,003 (150% of state; 148% of nation)
1999 Per Capita Income: $29,114 (138% of state; 135% of nation)
Overall debt burden: 2.3%
Payout of principal (10 years): 40.1%
Fiscal 2009 General Fund balance: $14.7 million (17.5% of revenues)
Post-sale parity debt outstanding: $296 million
The principal methodology used in this rating was General Obligation
Bonds Issued by U.S. Local Governments published in October 2009.
Information sources used to prepare the credit rating are the following: parties
involved in the ratings and public information.
Moody's Investors Service considers the quality of information available on the
credit satisfactory for the purposes of assigning a credit rating.
Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.
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Lauren Von Bargen
Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S ASSIGNS Aaa RATING TO THE FORSYTH COUNTY WATER AND SEWERAGE AUTHORITY'S (GA) $28.13 MILLION REVENUE REFUNDING BONDS, SERIES 2011
Moody's Investors Service
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New York, NY 10007