Correction: Fitch Rates Oneida County, NY GOs 'A-'; Downgrades Outstanding GOs; Outlook to Stable.

NEW YORK -- (This is an amended version of a press release issued yesterday. It contains a new date regarding the expiration of the sales tax increase in the second paragraph).

Fitch Ratings assigns an 'A-' rating to Oneida County, New York's (the county) $18,575,000 general obligation (GO) public improvement (serial) bonds, 2006. Scheduled to be sold competitively on April 12, the bonds mature April 15, 2007-2021 and bear interest payable on each October 15 and April 15, commencing on April 15, 2007. Concurrently, Fitch downgrades to 'A-' from 'A' the county's approximately $80 million in outstanding GO bonds and affirms the 'F1' rating on the county's outstanding GO bond anticipation notes (BANs). The Rating Outlook is revised to Stable from Negative.

The downgrade to 'A-' is based on the county's continual structural imbalance signaled by its reliance on nonrecurring revenues for operations generated largely from tobacco settlement securitization bond proceeds, a weakened financial position over the last few fiscal years, and reduced financial flexibility underpinned by declining reserve levels. Absent a formal plan on the use of the tobacco securitization bond proceeds, officials intend to apply the proceeds to defer a substantial property tax increase and to offset the sunset in November 2007 of a 1.5% sales tax increase implemented in March 2005. Although the Medicaid spending cap beginning in fiscal 2006 and several settled labor contracts through fiscal 2010 should provide a degree of budget stability, the restoration of reserves back to the level recorded in the late 1990's appears unlikely. Amid these challenges, important credit strengths remain. Recent population losses appear to have moderated, and both the county's tax base and labor market have shown modest but steady improvements in recent years. Furthermore, the county has low debt levels with rapid principal amortization and manageable capital needs. The Outlook revision to Stable from Negative reflects Fitch's expectations that the county's financial position and flexibility will not deteriorate further over the near term and that the county's overall credit characteristics are now consistent with the lowered rating of 'A-'. The 'F1' rating on the county's outstanding GO BANs is based on the county's long-term credit characteristics.

Located in central upstate New York in the area commonly known as the Mohawk Valley, Oneida County has shown marginal economic improvements in recent years. Population loss appears to have moderated recently, with the county's 2005 population estimated at 234,105, down just 0.6% compared to the 2000 census and in stark contrast to the 6.1% loss during the 1990s. The services sector remains a major contributor to the county's labor force, with entities such as Metropolitan Insurance, Blue Cross/Blue Shield, and Bank of America among the 50 tenants located in the Griffiss Business and Technology Park. The successful gaming operation at the Oneida Indian Nation and the planned addition of civilian jobs pursuant to the order by the 2005 Base Realignment and Closure Commission (BRAC) should continue to help expand and diversify the area's economic base. After peaking at 5.5% in 2003, the county's unemployment rate has declined gradually to 4.9% for January 2006, just above that of the nation (4.7%) but below that of the state (5.2%). Consistent with the upstate New York region, income levels in the county remain below average, and market value per capita is below average at $33,004.

Similar to other upstate New York counties, Oneida County remains pressured by increasing mandated social service costs, leading to fund balance drawdowns in three out of the last four audited fiscal years. Based on audited results for fiscal 2004, the general fund balance drawdown amounted to $9.7 million, and the general fund balance dropped to a slim 2.7% of total general fund spending, compared to a high 11.1% for fiscal 1999. Although the general fund is estimated to generate an operating surplus of $19.3 million for fiscal 2005, the favorable results are largely attributed to the recognition of $14.3 million in tobacco settlement securitization bond proceeds, with the remaining $5 million contributed by lower-than-budgeted Medicaid cost increase and cost control measures. Although a formal plan on the use of the tobacco settlement securitization bond proceeds is not yet in place, officials intend to apply the proceeds over the next few fiscal years to defer a substantial property tax increase and to offset the scheduled sunset of the 1.5% sales tax increase implemented in March 2005. The adopted budget for fiscal 2006 incorporates a property tax levy increase of a mere 1.3% and a general fund balance appropriation of $2.3 million, but prudently does not include any property tax receipts to be paid by the Oneida Indian Nation on tribal land owned off its reservation. Currently officials have no plan to restore reserves back to the levels recorded in the late 1990's, and Fitch notes the county's reliance on non-recurring revenue sources for operations is indicative of its weakened financial flexibility. Somewhat offsetting these concerns, the Medicaid spending cap beginning in fiscal 2006 and several settled labor contracts through fiscal 2010 should help move the county's financial operations close to structural balance, thus justifying a Stable Rating Outlook at the lowered rating of 'A-.'

The county's debt profile remains an important credit strength. Direct debt levels are low, and principal is retired rapidly at 42.0% and 77.2% in five and 10 years, respectively. Incorporating outstanding debt of numerous towns, villages and school districts in the county, overall debt levels remain within the moderate range at $1,343 per capita and 4.01% of market value. The county's current six-year capital improvement plan through fiscal 2011 totals a manageable $89 million and indicates that borrowing needs should remain affordable over the next few years, as the county's larger capital commitments have already been met.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.