Fitch Rates Montgomery County, Maryland's $200MM GOs 'AAA'.

WASHINGTON -- Fitch Ratings assigns an 'AAA' to Montgomery County, MD's (the county) $200 million general obligation (GO) bonds consolidated public improvement bonds of 2005, series A, scheduled for a competitive sale on May 17. Fitch also affirms the 'AAA' rating on approximately $1.3 billion in outstanding GO bonds. The Rating Outlook is Stable.

The 'AAA' rating reflects Montgomery County's broad and diverse economy, enhanced by the U.S. government's extensive presence and residual expansion of the information and biotechnology industries, strong fiscal management, and manageable debt levels with rapid amortization.

Montgomery County, with a 2004 estimated population of 931,000, borders Washington, D.C. and northern Virginia. The county's wealthy suburban economy is fueled by a large U.S. government presence, which provides some stability during slower economic times. The biotechnology sector continues to expand, drawing on the county's well educated labor force. The unemployment rate remained below state and national averages in March 2005, at 3.3%. Assessed value (AV) growth has averaged a steady 6% annually since fiscal 2000, and Maryland's three-year phase-in of annual AV increases should contribute to continued solid tax base growth over the next several years. The county remains among the wealthiest in the country, according to all available sources.

The county's financial performance continues to be strong, despite a temporary reduction in its financial flexibility in fiscal 2004. However, due to conservative budgeting and tight expenditures controls, fiscal 2004 ended with a $32.5 million surplus. With the surplus, the county's unreserved general fund balance increased to 6.5% of spending after three years of drawdowns; the total governmental funds operating reserve likewise improved well above the county's 6% policy.

Reflective of the county's superior credit rating and continued financial growth, the fiscal 2005 budget restored significant pay-as-you-go capital funding, reduced from the prior year, and also maintained the budgeted total operating reserve at the 6% policy level. Projections for fiscal 2005 show another strong year as income, transfer, and recordation taxes are well above budget. The county executive's proposed fiscal 2006 budget funds the operating reserve at the policy level and proposes a modest decrease in the property tax rate while still funding an 8% growth in expenditures from the prior year.

Debt levels are moderate and amortization remains rapid at over 70% in 10 years. Excluding debt of the Washington Suburban Sanitary Commission (WSSC), which is secured by property taxes but actually payable from rates and charges on properties served, overall debt equals $2,647 per capita, or 2.6% of full market value. If WSSC debt is included, overall debt remains a moderate $3,734 per capita, or 3.7% of full market value. The 2005-2010 countywide $2.4 billion capital plan includes general obligation bond funding of about 57%, with pay-as-you-go funding contributing roughly 25%.