Fitch Rates Washington County Water Conversancy District, Utah's $4.1MM LTGO Refunding Bonds 'AA'.

SAN FRANCISCO -- Fitch Ratings assigns an 'AA' rating to $4.1 million Washington County Water Conservancy District, Utah (limited tax) general obligation (LTGO) refunding bonds, series 2009. The Rating Outlook is Stable.

The series 2009 bonds are expected to sell via negotiation on Nov. 3, 2009. The bonds are secured by ad valorem property tax revenues levied at a rate sufficient to pay annual principal and interest debt service costs. The district's current tax levy rate is well within the state legislative cap. General obligation debt service repayment is the first lien on ad valorem (AV) property tax revenues, before system operations and maintenance support. The purpose of this refunding is to achieve annual interest rate savings.

The 'AA' rating reflects the essential service operated by this predominantly wholesale water system provider for an entire county. In addition, strong district management provides for stable operations, which feature strong financial results, low debt levels, solid and growing reserves, and multi-year financial and facilities planning. The district's below-average socio-economic status is being pressured by rising unemployment and declining employment opportunities. The latest taxable assessed valuation (AV) also has declined as a result of the pressures in the housing market. However, there is room within the district's property tax rate cap for further tax rate increases. While the district's recent history of fast population, employment, and AV growth have slowed in the current economic climate, the district is still projecting significant further population and economic growth when the economy rebounds. The district has sufficient resources to address most of the resulting water system capital project needs with pay-as-you-go funding.

The district operates primarily as a wholesale supplier of water to various municipalities in Washington County, and provides retail water services where necessary. The district's boundaries are coterminous with the county's. The district has adequate water sources which can be augmented relatively easily, is expanding its water reserves, enjoys surplus system capacity, operates predominantly new infrastructure, and faces no regulatory issues. The pressure for system expansion posed by forecasted population growth appears to be manageable from the financial, planning, implementation, and system management perspectives.

In fiscal 2008, the district's general fund balance grew to $8.8 million from $8.3 million at fiscal 2007 year-end (Dec. 31), although as a percentage of spending it declined somewhat. Nevertheless, reserves remained substantial at 90% of expenditures and transfers out for fiscal 2008. The district projects that its fiscal 2009 general fund revenue results will be relatively flat since its certified tax rate rose to compensate for declining taxable AV and there is still residential property growth within the district. Due to expenditure controls, fiscal 2009 expenditures are projected to end at approximately 75% of budget. In fiscal 2010, the district is budgeting to hold general fund expenditure levels constant, transfer a significant portion of its surplus general fund balance to its capital fund, and increase its reserves.

Direct debt is a very low $51 per capita, or 0.1% of market value. Overall net debt of $2,287 per capita is a low 2.3% of market value. Debt amortization is average, with the exception of the district's GO debt which fully amortizes in eight years. Under its 2006 regional water sales agreement with wholesale customers, the district is required to maintain a 30-year capital improvement program. In order to meet projected population growth, this capital improvement program envisages capital project costs of $385 million over the next 30 years. The district expects to fund this amount predominantly through impact fees and water development surcharges and is not planning to issue additional debt before fiscal 2015.

Additional information is available at 'www.fitchratings.com'.

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