Fitch Rates King County, Washington's $84MM LTGO BANs 'F1+'.

SAN FRANCISCO -- Fitch rates King County, WA's $53,000,000 Limited Tax General Obligation Bond Anticipation Notes 2006, Series A and $31,445,000 Limited Tax General Obligation Bond Anticipation Notes 2006, Series B 'F1+'.

Also, Fitch affirms the following ratings:

--$314.9 million outstanding unlimited tax general obligation bonds at 'AAA';

--$1.34 billion outstanding limited tax general obligation bonds at 'AA+'.

The Rating Outlook for the long-term issues is Stable.

The bond anticipation notes (BANs) will be sold competitively on Oct. 16. The county's financial advisor is Seattle-Northwest Securities Corp.

The ratings reflect the county's dependable economic base, strong financial position, low debt burden, and excellent financial management. While subject to cyclicality, the county's economy shows predictable movements and is marked by relatively high wealth levels and moderate unemployment rates. County reserve levels remain prudently high, the result of solid financial planning and adherence to strong council-adopted policies. Also, the county's debt burden is low and affordable, with much capital funding coming from dedicated real estate excise taxes. The ratings also consider the county's property tax-dependence and the strict limitation of I-747.

King County's economy gains stability and some diversification through its role as the state's commercial and economic center. However, the employment and tax bases are dominated by the Boeing Company, by far the area's largest employer and a significant taxpayer as well. Nonetheless, the area's vulnerability to Boeing's cyclicality has lessened with the growth of the Microsoft Corporation, other technology-related businesses, and companies serving these concerns, as well as the area's overall population growth. The greater stability was evidenced during the recent recession when the county's unemployment rose to a 6.9% peak in 2003, well below levels experienced in prior economic downturns. The jobless rate improved to 4.8% in 2005, with jobs showing a similarly quick recovery. Income levels are above average for the state and well above the U.S. median levels, indicative of the high salary nature of many of the manufacturing jobs as well as the above average incomes associated with many technology sector jobs.

The county's financial operations benefit from strong management policies and practices, including the council-approved requirement that the general fund unreserved and unallocated fund balance equal at least 6% of current operating revenue. In fact, the county has maintained higher balances, and holds conservatively determined balances for specific purposes. The 2005 ending general fund balance totaled $144 million, a high 27% of expenditures and transfers out. The unreserved and undesignated portion, $97 million, also was strong at 18% of spending.

Fitch notes that the county's dependence on property tax revenue (44% of general fund revenue) is of some concern given I-747's strict limitation on property tax revenue growth to 1% over the highest levy in the last three years. Despite the recent court ruling determining I-747 to be unconstitutional, it remains in effect while the court action is under appeal. Fitch views the county's proactive management efforts, evidenced by prudent reserve policies, adjusting service delivery to reduce unrecovered costs, restricting excess revenue for capital needs, and advance funding of anticipated pension increases, as offsetting much of this concern.

King County's debt burden is low, largely the result of a policy favoring cash funding over debt and healthy real estate excise tax collections. Including overlapping debt the burden remains low at $3,179 per capita and 2.1% of taxable market value. In addition to refinancing the currently offered BANs with long-term debt, the county expects to issue about $300 million in long-term obligations in the next few years. Given the existing debt's rapid retirement, the county's debt ratios likely will remain affordable.

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.