Fitch Rates Ulster County, New York's $49.7MM GOs 'A+'.

NEW YORK -- Fitch Ratings assigns an 'A+' rating to Ulster County, New York's (the county) approximately $49.7 million general obligations public improvement (serial) bonds, 2006. The bonds are expected to price competitively on April 13. The proceeds of the bonds will be used to retire bond anticipation notes maturing June 9, 2006 that were issued to fund construction of a law enforcement facility. Fitch affirms the 'A+' rating on the county's $68 million outstanding GO bonds. The Rating Outlook is Stable.

The 'A+' rating reflects the county's stable economic base, low debt burden and manageable capital needs. The county's financial condition has deteriorated in 2004 and 2005, but reserve levels remain adequate for the rating category. Like all counties in the state, Ulster County's financial flexibility is constrained by its high fixed cost burden. Beginning in 2006 the county has taken steps to raise recurring revenues to stabilize its financial position and begin rebuilding reserve levels. Fitch expects that beyond 2006 the county will maintain structural balance and make strides toward meeting its reserve policy goal by identifying additional sources of recurring revenue and constraining growth in discretionary spending.

Located in the east central portion of the state, along the west side of the Hudson River, the county is directly between New York City and Albany. The county is home to a variety of recreational and educational facilities, such as the Catskill and Shawangunk Mountains and the State University of New York at New Paltz, which have resulted in the development of the area as a vacation and residential center. Since the 2000 census the county's population has increased an estimated 2.8%, compared to a statewide increase of 1.5%. The presence of the health care and higher education industries provide stability to the seasonal nature of the county's tourism-centered economy. The county's unemployment rate has historically been lower than those of the state and nation, and registered a low 4.3% in 2005. County residents' income levels are slightly below those of the state and nation.

The county's improved budgeting practices led to substantial improvements in reserve levels in comparison to results reported in the early 1990s, when general fund balance levels reached a negative $8 million. However, the use of reserves to fund operations in 2004 and 2005 has resulted in a deterioration of the county's financial position. The general fund posted an $8.3 million deficit at the close of 2004, and an additional operating draw from fund balance of $10.6 million is expected for 2005. This use of reserves will result in a total general fund balance equal to 6% of spending and transfers out. In past years the use of a large portion of the prior year's fund balance was typically budgeted to offset property tax increases. In contrast, the 2006 budget was funded by a 38% increase in the property tax levy tax and a minimal amount of prior year's fund balance was budgeted; this increase in recurring revenues will aid in the maintenance of structural balance and restoration of the reserve position. County officials report that there is a commitment to restore the undesignated general fund balance to between 5% and 10% of spending over the next several fiscal years.

Direct debt is low at $991 per capita and 1.1% of estimated full property value and includes debt issued by the county to fund capital expenditures of the Ulster County Community College as well as the outstanding debt of the Ulster County Resource Recovery Agency, for which the county is obligated to fund operating deficits through payment of a service fee annually. Capital needs are manageable; the fiscal 2006-2011 capital improvement plan (CIP) anticipates $120 million of expenditures, mostly focused on public health, education, and road maintenance. The CIP is anticipated to be 60% debt funded with the remaining 40% funded by other sources, including state and federal contributions.

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.