OREANDA-NEWS. Fitch Ratings has affirmed the following Fauquier County, Virginia general obligation (GO) bonds:

--$13.2 million GO school refunding bonds series 2012 at 'AA+';
--$23 million GO school bonds series 2006 at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the county, for which its full faith and credit are irrevocably pledged.

KEY RATING DRIVERS

STRONG FINANCIAL PROFILE: The county's longstanding fiscal discipline and strength are reflected in its conservative budgeting, prudent fund balance policy, cash funding of capital needs, ample revenue raising capacity, and demonstrated ability to maintain healthy financial flexibility in times of stress.

FAVORABLE DEBT POSITION: Limited intermediate-term debt plans and a rapid amortization rate will allow the county to maintain the current low debt burden. Long-term obligations related to pension and retiree health benefits do not pressure the credit profile.

RURAL BUT AFFLUENT ECONOMIC BASE: Though largely rural in character the county benefits from its proximity to employment opportunities in the thriving Northern Virginia job market which have contributed to strong economic indicators, including high wealth levels and low unemployment.

RATING SENSITIVITIES

STRONG FINANCIAL MANAGEMENT: Fitch expects the county's strong financial position to remain stable over the next several years, debt to remain low, and key income and employment metrics to perform satisfactorily despite limitations within the county employment base.

CREDIT PROFILE

Fauquier County is located 40 miles southwest of Washington DC, and is largely rural and agrarian in nature. Development activity is centered in the county's nine service districts and three incorporated towns, reflecting the county's stated intention to retain its rural character.

SOUND FINANCIAL MANAGEMENT AND HEALTHY RESERVE LEVELS

Financial operations are sound, as evidenced by consistent maintenance of reserves in line with the adopted fiscal policy of an unassigned fund balance at 10% of general operating revenues. Fiscal 2015 ended with a small spend down of general fund reserves of $899 thousand (0.8% of spending), primarily used to pay for one-time capital costs. The county pays capital costs through its separate Capital Project Fund which ended fiscal 2015 with reserves of $9.1 million, roughly 5% of spending. General fund reserves remained a healthy 12.6% of spending.

The adopted fiscal 2016 budget increases spending by 2.2% over the prior year's budget and includes a $1 million fund balance appropriation for capital and other one-time costs.

The budget includes a small property tax increase to fund mandated school costs and a 2% cost-of-living increase for all county staff. The tax rate is relatively high for the state although it is regionally competitive. Furthermore, the county is not subject to any legal or statutory restrictions on the property tax rate or levy. Property taxes account for approximately 70% of general fund revenue. Early indications by management show permitting fees and sales tax revenues performing well in addition to positive property tax receipts relative to budget.

PROXIMITY TO NORTHERN VA MARKETS SPUR STRONG ECONOMIC METRICS

With a well-educated workforce and close proximity to vibrant labor markets the county has maintained low unemployment rates and high wealth indicators. Roughly 82% of residents commute outside of the county for employment, primarily to Fairfax, Prince William, and Loudoun counties. As of October 2015, the county's low unemployment rate of 3.6% was well below that of the state's 4.1% and nation's 4.8%. Median household income is approximately 40% to 70% higher than that of the state and nation, respectively, according to census data.

The bedroom community's access to strong employment markets translates to a very high market value of $177 thousand per capita. The most recent tax base revaluation was effective January 1, 2015 and the county's tax base increased a modest 1.1% over the fiscal 2014 assessed valuation. Included on the tax roll for the first time was the Fauquier Medical Center which completed a merger in 2013, the outcome of which is a new top ten taxpayer that accounted for 0.7% of the tax base increase and produces roughly $1 million in new recurring real estate tax revenues. Other economic development announcements include a $200 million data center expansion that will create 51 jobs near Warrenton. The private investment is the largest in Fauquier County history and is expected to be complete in 2018 with new tax revenue to begin in fiscal 2019 after three years of significant tax breaks. Otherwise, the majority of county businesses are small in nature, with 91% having fewer than 20 employees.

LOW DEBT LEVELS

Debt levels are modest with overall debt equaling 1.1% of market value and $1,881 on a per capita basis. Amortization is rapid at 74% repaid within ten years. Debt levels are expected to remain fairly low with only limited debt issuance anticipated over the next few years. The county has no exposure to variable rate debt.

The fiscal 2016-to-2020 capital improvement plan (CIP) totals $96 million (0.8% of market value), with the majority of projects focused in four categories: schools, public safety and fire, parks and recreation, and library facilities. Cash funding is slated for $12.5 million over the course of the plan, consistent with the county's history of solid pay-as-you-go capital financing.

LIMITED OTHER LONG-?TERM LIABILITIES

All full-time, salaried, permanent employees of the county participate in the Virginia Retirement System (VRS), an agent multiple employer defined benefit pension plan administered by the Commonwealth. The county's portion of the VRS is well-funded at 92.3% as of June 30, 2014 using a 7% return on investment assumption. The county's net pension liability (NPL) as a percentage of market value is very low at less than 0.1%. The county pays the full contractually required payment, which is based on an actuary's determined rate. In fiscal 2015 the payment was $3.2 million (1.8% of government spending) and the lowest payment since fiscal 2007.

The county provides other post-employment benefits (OPEB) as an implicit rate subsidy to retirees who pay the full cost of premiums. The county prudently contributes the full OPEB ARC and the total unfunded liability is less than 0.4% of market value. The total carrying costs for debt service, pension, and OPEB totaled a low 9.7% of total governmental fund spending in fiscal 2015.