Fitch Affirms Weber County, Utah GOs at 'AAA'; Outlook Stable
--\\$37.9 million GO and refunding bonds, series 2013 at 'AAA'.
The Rating Outlook is Stable.
The bonds are general obligations of the county payable from the proceeds of ad valorem taxes levied, without limitation as to rate or amount, on all taxable property within the county, sufficient to repay fully each year's principal and interest amount.
KEY RATING DRIVERS
HEALTHY FINANCIAL POSITION; BUDGET BALANCE: The county continues to maintain solid general fund balances and good liquidity, augmented by good reserves and borrowable funds outside the general fund. The county budgets conservatively.
AFFORDABLE DEBT PROFILE: The county's debt structure is characterized by low debt, above-average principal amortization, limited future debt issuance plans, and low carrying costs even with the inclusion of a contingent debt obligation. Pension costs have stabilized and the county's other post-employment benefit (OPEB) plan is closed.
SOLID AND DIVERSE ECONOMY: The county economy is well diversified, with good development prospects, and its tax base continues to benefit from new development. While the county's unemployment rate is low, its mixed socioeconomic characteristics likely reflect larger family sizes and a relatively young population.
The rating is sensitive to shifts in fundamental credit characteristics including the county's low debt profile, strong financial management practices, and diversified economy. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.
The county is situated approximately 35 miles north of Salt Lake City and covers 662 square miles, with its major population areas located at the foot of the northern Wasatch Mountains. It is the fourth most populous Utah county with an estimated 2014 population of 240,475. The county seat is Odgen City, and there are 14 other municipalities.
HEALTHY FINANCIAL POSITION
The county ended 2014 with a strong unrestricted general fund balance of \\$12.7 million or 18.1% of spending. Projected balanced operations in 2015 and 2016 should maintain the unrestricted general fund balance at a comparable level. Any projected general fund balance growth during those years is tied largely to anticipated state reimbursements for county facility and land purchases. These purchases were the primary cause of a general fund net operating deficit after transfers of \\$4.1 million in 2014. Similarly, a small \\$0.6 million general fund net deficit after transfers in 2013 had been caused by capital project funding expected to be reimbursed from the recently extended recreation, arts, museums, and parks (RAMP) sales tax.
The healthy general fund results are augmented by good reserves and borrowable funds held outside the general fund, the ability to shift parts of the county's tax rates to the general fund if necessary, and the automatic property tax levy adjustment that occurs in Utah jurisdictions when there are assessed valuation declines. This automatic property tax adjustment provides valuable downside protection for the county's largest general fund revenue source (property taxes represented approximately 42% of 2014 general fund revenues).
The county has consistently demonstrated its ability to offset any general fund revenue volatility on the expenditure side, assisted by conservative budgeting and a flexible legal framework for labor (there is no collective bargaining). During the recession, the county used attrition, vacant positions, personnel expenditure controls, and departmental cost cutting to good effect, only experiencing a very small general fund net operating deficit after transfers in 2010. There are no deficits in funds outside the general fund.
AFFORDABLE DEBT PROFILE
The county's total debt burden is low at \\$1,265 per capita and 1.8% of market valuation. Principal amortizes at an above-average 63% in 10 years. The only anticipated new debt issuance, \\$10.6 million of GO bonds likely to be issued in 2016, would be the second and final tranche of debt to finance library improvements and would not have a material impact on the debt burden.
The county participates in the Utah Retirement System. Participants' contribution rates increased significantly in recent years as the system absorbed recessionary investment losses, but contribution rates have now stabilized. The county makes its full actuarially determined contributions annually.
Under a closed OPEB plan, the county offers retirement benefits only to employees who joined the county before Jan. 1, 2008. The benefits, employer contributions, and employee contributions are governed by county policy and can be amended at any time. The OPEB unfunded actuarial accrued liability (UAAL) is modest. The county expects to continue funding OPEBs on a pay-as-you-go basis.
The county's total debt service, pension contribution, and OPEB pay-as-you-go costs in 2014 were a low 11.2% of total governmental expenditures. This level of carrying cost should remain roughly stable given limited new debt issuances, the moderate amortization of outstanding debt, stabilized pension contributions, and the closed OPEB plan.
The county guarantees repayment of \\$17.7 million in special assessment bonds it issued in 2013 to pay for public infrastructure improvements to privately-owned land adjacent to the Powder Mountain ski resort. (The 2013 bonds are not rated by Fitch.) The county expects that the bonds will be repaid fully by special assessments collected from a private development company and future property owners. In the event that this did not occur, the county's liability is limited to an easily manageable \\$1.5 million per year annual debt service (representing 2.3% of 2014 general fund revenues). Fitch's debt calculations conservatively include the 2013 bonds.
SOLID AND DIVERSE ECONOMY
The county employment market is dominated by Hill Air Force Base (located in adjacent Davis County), government, education (including Weber State University which has 25,000 students), health care, and a significant manufacturing presence. After hitting a high 9% in 2010, the county's unemployment rate dropped to 3.7% in May 2015, in line with the state (3.4%), and below the national rate of 5.3%. Since 2011, the county's employment growth has been outpacing its labor force growth.
The county's mixed socioeconomic profile is characterized by below-average per capita money income, but slightly higher than average median household income and a below-average individual poverty rate. This likely reflects larger family sizes, a relatively young population, and the county's below-average educational profile.
The county's taxable assessed valuation took an 8.6% hit during 2010-2012, primarily due to residential property value declines. It has more than rebounded by 14% subsequently, and the county is expecting further 1% growth in 2016. The county is seeing considerable ongoing investment by leading local businesses, growing numbers of residential building permits, rising property values, and fewer property foreclosures.
The county's tenured administration meets all its financial management policy and procedure requirements and relevant state legislation. While the community is very tax sensitive, voter support for the 2013 library bond measure proved more than sufficient at 54% and in 2014 75% of voters approved a 10-year extension of the RAMP sales tax.