Fitch Rates Howard County, Maryland's $110MM GOs 'AAA'; Outlook Stable.

NEW YORK -- Fitch Ratings assigns an 'AAA' rating to Howard County, Maryland's (the county) estimated $110 million general obligation (GO) bonds, 2007 series A. The $110 million GOs consist of $100 million consolidated public improvement bonds, 2007 series A and $10 million metropolitan district bonds, 2007 series A. The GOs are scheduled to price via competitive sale on March 29, 2007. Evergreen Capital Advisors, Inc. and Public Resources Advisory Group serve as the co-financial advisors. In addition, Fitch affirms the county's $660 million outstanding GO bonds at 'AAA'. The Rating Outlook is Stable.

Howard County's 'AAA' GO credit rating reflects the diversity of its tax base, the relative affluence of its residents, its sound financial management and long-range planning, and a moderately low debt burden. From fiscal 2001 to fiscal 2003, structural imbalances reduced the total fund balance and diminished the amount of pay-as-you-go capital funding. Subsequently, county leaders effectively addressed the recession-led budgetary imbalances with revenue enhancements and spending prioritization. As a result, total fund balance and pay-as-you-go capital funding have been restored to the budget at solid levels and fiscal reserves have been replenished to their charter level.

Howard County's relative affluence, high quality of life, excellent schools, and proximity to both Baltimore and Washington, D.C. have resulted in continued strong demand for housing and related commercial expansion. Repeatedly listed as one of the best places to live in popular magazines, the county controls its growth, limiting new housing units to 1,850 annually and placing 10% of its land under permanent farmland preservation easements. Corporations are attracted to the county and its highly educated work force. Twenty commercial buildings totaling 1.4 million square feet are under construction, and developers have submitted plans for an additional 31 buildings totaling 5 million square feet. Further growth is anticipated as recent Base Realignment and Closure Commission (BRAC) recommendations will bring the Defense Information Systems Agency and other Defense departments' activities to Ft. Meade, in adjacent Anne Arundel County. Residential employment remains strong, with the December 2006 unemployment rate of 2.5% comfortably below the state's 3.6% and the nation's 4.5%. Wealth and income indicators are high and above state and national averages.

Financial operations are stable after a difficult recessionary period, during which the loss of capital gains and bonus income severely eroded income tax collections. Strong financial management increased the fiscal 2006 unreserved general fund balance to $65.7 million, representing 9.9% of spending from a negligible $307,500, or 0.1% of spending, in fiscal 2003. The county has restored the general fund charter reserve to 7% of the prior year's audited expenditures and is increasing its pay-as-you-go funding for capital needs. In fiscal 2006, the county designated $30 million of its fund balance to fund its obligations for healthcare and other post-employment benefits (OPEB).

Debt levels are moderate, with net direct debt at 2.1% of market value, and amortization is above average at 59.2% in 10 years. In addition to ongoing long-term borrowing, the county continues to borrow on a short-term basis to provide for interim financing of the capital improvement program (CIP). The current $100 million outstanding of bond anticipation notes will be redeemed and refinanced on a long-term basis with proceeds of the current offering. The fiscal 2008 through fiscal 2012 CIP totals $1.1 billion, with 51% of planned spending for the highly regarded kindergarten through grade 12 school system and the local community college. Tax supported debt will fund 72% of the CIP, although debt affordability is measured annually, along with operating projections, by a spending affordability advisory committee.

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