Fitch Rates Nassau County, New York's $180MM GOs 'A+' & $110MM RANs 'F1+'.

NEW YORK -- Fitch Ratings assigns an 'A+' rating to Nassau County, NY's (the county) approximately $140 million general obligation (GO) bonds, series 2008C, and $40 million GO refunding bonds, series 2008D. The bonds are scheduled to price on June 18, 2008. Bond proceeds will be used to finance various capital improvement projects and refund certain outstanding bonds of the county. In addition, Fitch affirms the 'A+' rating on the county's approximately $537 million in outstanding GO bonds and Nassau Health Care Corporation's (NHCC) approximately $296.2 million outstanding county-guaranteed bonds. The Rating Outlook is Stable.

In addition, Fitch assigns an 'F1+' short-term rating to Nassau County, NY's approximately $110 million GO revenue anticipation notes (RANs), series 2008. The RANs are due April 15, 2009 and May 15, 2009. The RANs are expected to price competitively on June 11, 2008. Proceeds will be used to provide funds to meet a cash flow deficit expected to occur during the period that the RANs are outstanding.

The 'F1+' rating on the county's RANs reflects adequate projected coverage on the repayment date, satisfactory legal protections for noteholders, significant levels of borrowable funds, and management's demonstrated ability to respond quickly to budget shortfalls and unexpected expenditure constraints. Projected coverage on both repayment dates based on the combined projected 2009 cash flows of the county's five major operating funds is strong at 5.61 times (x) in April 2009 and 3.86x in May 2009. Including borrowable liquid resources in excess of $150 million available from tobacco and sewer and storm water funds, coverage levels increase to even stronger levels of 8.22x and 6.81x in April and May, respectively.

The notes are general obligations of the county, for the payment of which the county has pledged its faith and credit, payable from sales tax revenues and any and all county revenue sources not otherwise legally committed. County sales tax revenues are 42.2% of total revenue of the county's major operating revenues with real property taxes constituting the second largest source of revenue at 31.3% of total revenue. The amount of the RAN borrowing has increased by $35 million compared to the $75 million issued in 2007.

The 'A+' rating on the county's outstanding GO bonds reflects the marked improvement in the county's financial condition since its fiscal crisis experienced at the beginning of the decade, resulting from the institutionalization of strong financial management practices. Other positive credit characteristics include a broad and wealthy economic base, high income levels, and moderate debt levels with above-average amortization rates. Credit concerns center on a high fixed-cost burden, borne by all counties in the state, financial exposure related to the NHCC, and a consistent trend of over-budgeting sales tax receipts, which is the county's largest revenue source. While sales tax revenue continues to demonstrate moderate growth annually, Fitch believes the variance between budgeted revenue assumptions and actual collections over the last several years is a

vulnerability.

Nassau County's 2006 estimated population of 1.3 million residents has remained relatively unchanged since the beginning of the current decade. The county's economy benefits from its proximity to the New York City metropolitan area as well as its own broad employment base and a diverse and wealthy tax base. The county's unemployment rate of 4.3% in January 2008 measured below that of the state (5.6%) and the nation (4.8%). Wealth levels are well above average; in 2005 per capita money income equaled 135% and 150% of the state and national levels, respectively. The county is home to 13 hospitals including North Shore-Long Island Jewish Health System, the third largest non-profit secular health system in the country, employing over 31,000, and the Winthrop S. Nassau University Health System.

Fitch believes that the county's 2008 budget and 2008-2011 multi-year financial plan (MYP) are less conservative than in past years, exhibiting continued reliance on speculative cost-saving measures, many of which require state legislative approval. Further, the out-years of the MYP rely on the assumption that recurring revenues will be raised through property tax increases, which the county has deferred for the last several years. Fitch notes, however, that the county has been successful in closing the forecasted budget gaps in each MYP submitted since fiscal 2002, primarily through much improved financial management, achieving labor concessions, and a state-imposed cap on annual growth in Medicaid expenses. The county expects to end fiscal 2007 with an operating surplus across all major operating funds of approximately $23.8 million of which the county will reserve $10 million for 2008 tax refunds.

Growth in sales tax receipts for 2007 over the prior year stands at 2.1%, notably lower than the 3.4% assumption included in the adopted 2007 budget, which results in a shortfall of approximately $18.961 million against the original 2007 budget and a shortfall of approximately $13.812 million against the 2007 budget as modified. While Fitch believes management has been proactive in addressing the shortfall, the 2.5% growth assumption included in the fiscal 2008 budget could present another negative variance given the recent trend in sales tax performance. The county reports that growth in sales tax revenues through May 2008 is 2.2% over the same period in 2007. The county has proposed not replacing 150 positions and limiting all but essential purchases to offset any shortfall as well as implementing other potential cost saving measures.

The county's debt burden, including the outstanding debt of the Nassau County Interim Finance Authority (NIFA) and the county's underlying municipalities and school districts, is moderate at $6,555 per capita or 4.26% of market value. The county's 2007-2011 capital improvement plan totals $786 million and is expected to be funded primarily through annual county debt issuance. Debt amortization is a credit strength, with 66% of principal retired within 10 years.

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