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Rating Action:

Moody's assigns Aaa to Fairfax County, VA's $467M GO Bonds, Series 2015A, 2015B, and 2015C; Outlook is negative

09 Feb 2015

Aaa applies to $2.4B of outstanding GO debt

New York, February 09, 2015 --

Moody's Rating

Issue: General Obligation Public Improvement Bonds, Series 2015A; Rating: Aaa; Sale Amount: $256,300,000; Expected Sale Date: 02-23-2015; Rating Description: General Obligation

Issue: General Obligation Public Improvement Refunding Bonds, Series 2015B; Rating: Aaa; Sale Amount: $66,120,000; Expected Sale Date: 02-23-2015; Rating Description: General Obligation

Issue: General Obligation Public Improvement Refunding Bonds, Series 2015C; Rating: Aaa; Sale Amount: $144,605,000; Expected Sale Date: 02-23-2015; Rating Description: General Obligation

Opinion

Moody's Investors Service has assigned a Aaa rating to Fairfax County's (VA) $256.3 million General Obligation Public Improvement Bonds, Series 2015A; $66.1 million General Obligation Public Improvement Refunding Bonds, Series 2015B; and $144.6 million General Obligation Public Improvement Refunding Bonds, Series 2015C. Concurrently, Moody's affirms the Aaa rating affecting $2.4 billion of outstanding general obligation debt, as well as affirms the Aa1 and Aa2 ratings assigned to the County's $608.8 million of rated essential debt and non-essential lease revenue bonds. The outlook for all of the ratings above is negative.

Moody's has also affirmed the MIG 1 rating assigned to the County's outstanding $21.4 million Series 2013A Bond Anticipation Note, which matures in March 2015 and is expected to be taken out through a private placement in February 2015.

SUMMARY RATING RATIONALE

The Aaa rating reflects the County's adequate financial position supported by comprehensive fiscal policies, large and diverse tax base with socioeconomic indices that are well above average, and reasonable debt burden with manageable future borrowing plans.

The Aa1 and Aa2 ratings on the lease revenue bonds issued by the Fairfax County Economic Development Authority and the Fairfax County Redevelopment and Housing Authority (RHA) reflect the risk associated with annual appropriation, as well as the relative essentiality of the projects. The risk of non-appropriation is largely mitigated by the County's strong credit quality (described below) and its practice of making a single annual appropriation for all County debt service. The ratings also reflect the County's demonstrated commitment to regional transportation and County housing initiatives.

The MIG 1 rating incorporates the County's demonstrated history of access to the capital markets, as well as the credit quality reflected in the County's Aaa long-term general obligation rating.

OUTLOOK

The negative outlook reflects recent declines in the County's available reserves to levels that are below-average when compared to other Aaa-rated entities. While future tax base growth, positive local revenue projections, and continued expenditure savings are expected to help offset future near-term budget gaps, some further budgetary pressures are likely to result from additional pension costs as the County increases its funding to meet the annual required contribution (ARC). While the County has taken measures to increase its annual contribution, we view this underfunding as a budgetary weakness. Any inability to continue to increase funding to meet the ARC could result in additional negative pressure. Furthermore, any additional draws on the County's reserve levels, both within and outside the General Fund, could result in negative credit pressure.

WHAT COULD MAKE THE RATING GO UP (REMOVAL OF NEGATIVE OUTLOOK)

• Increased reserve levels that are more in line with other Aaa-rated entities

• Continued progress on fully funding pension ARC

• Ability to achieve and maintain structural balance

WHAT COULD MAKE THE RATING GO DOWN

• Further declines in reserve levels

• Inability to increase pension funding to meet ARC

• Continuation of structural imbalance

OBLIGOR PROFILE

Fairfax County is located in the northeastern corner of Virginia (Aaa stable) and has a population of 1,130,924. The County benefits from its favorable location, high-end employment base and strong wealth levels, which lend long-term stability to this $207.9 billion broad-based tax base.

LEGAL SECURITY

The bonds are secured by the County's general obligation, unlimited tax pledge.

USE OF PROCEEDS

Proceeds from the Series 2015A bonds will fund various general government improvements primarily related to schools (68%), as well as other transportation, park, public works, and storm drainage projects. The Series 2015B bonds will advance refund the Series 2008A, Series 2009A, Series 2011A, and Series 2013A bonds for an estimated net present value savings of $6.2 million, or 8.8% of refunded principal, with no extension of maturity. The Series 2015C bonds will forward refund the Series 2005A bonds for an estimated net present value savings of $15.8 million, or 10.2% of refunded principal, with no extension of maturity.

RATING METHODOLOGY

The principal methodology used in rating the general obligation debts was US Local Government General Obligation Debt published in January 2014. The principal methodology used in rating the lease rental debts was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December 2011. The principal methodology used in rating the bond anticipation notes was US Bond Anticipation Notes published in April 2014. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jennifer Lauren Diercksen
Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Julie A Beglin
VP - Sr Credit Officer/Manager
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Aaa to Fairfax County, VA's $467M GO Bonds, Series 2015A, 2015B, and 2015C; Outlook is negative
No Related Data.
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