Fitch U.S. Public Finance Surveillance: Concord (North Carolina) 'AA' GO & 'AA-' COPs Affirmed.

NEW YORK -- Fitch Ratings affirms the City of Concord, North Carolina's, 'AA' rating on approximately $560,000 in outstanding general obligation (GO) bonds and 'AA-' rating on $35 million in outstanding certificates of participation (COPs) series 2001 and 2005. The Rating Outlook is Stable. The affirmations come following Phillip Morris' announcement that it will be closing its manufacturing facilities in Concord.

The 'AA' rating reflects the city's strong financial position and steady population and tax base growth, with good prospects for continued expansion and diversification. While its largest taxpayer, Phillip Morris, will phase out operations in the city by the end of 2010, Fitch believes that the city is sufficiently well-positioned to absorb the loss. As part of the very strong Charlotte metropolitan statistical area, Concord's labor force and employment profile are favorable, and the city's moderate tax rate and high reserve levels afford it ample financial flexibility. Fitch acknowledges that the city may experience some employment and tax revenue losses over the short term but expects any interruption to be temporary given the area's steady growth and the likelihood that the Philip Morris property's desirable location will lend itself to redevelopment.

Philip Morris will begin to phase out operations in 2009 and the city anticipates revenues to decline as operations are terminated at the end of 2010. Philip Morris accounts for 14% of its total assessed value and the city expects to lose an estimated $2.56 million (or the equivalent of approximately 3 cents of the city's tax rate) in tax revenue once the operations are closed. Philip Morris is also the city's second largest employer with approximately 2500 employees, although the closure is expected to have limited impact on unemployment as many employees are reaching retirement. The city reports that workers have been offered positions in Richmond, VA, where operations are being relocated.

Located along the rapidly growing Interstate-85 corridor the City of Concord is approximately 25 miles from Charlotte, allowing Concord to benefit from Charlotte's economic growth. The city is home to the Lowe's Motor Speedway, a sports and recreational facility that seats 167,000 people, and Concord Mills, a 1.4-million-square-foot (sq ft) mall, both of which are among the city's top taxpayers. Recently completed or ongoing developments include a new 70,000 sq ft convention center three hotels, and the North Carolina Research Campus (NCRC) in nearby Kannapolis. The NCRC has the potential to create thousands of new jobs in Cabarrus County, many in the biotechnology and life sciences industries. The city's population has grown at an average annual rate of 3.5% since 2000 compared to the 2.8% of both Cabarrus County and Charlotte MSA. Rapid population growth is largely attributable to the annexation of property to allow developers to gain access to the city's water sewer system.

The city's estimated assessed value for fiscal 2008 grew 7%, and the $.4475 per $100 tax rate is below average for a North Carolina city. The city annually adopts a budget using the reserve policy as a guide which states the city must maintain an undesignated fund balance minimum between 30%-35% of general fund expenditures. In fiscal 2007, on an unaudited basis, Concord's unreserved balance of 47.9% was well above its policy level due to steady property and sales tax revenue growth.

While direct debt has declined, the overall debt burden has grown to an above-average 5.01% of market value due to increased borrowing by Cabarrus County. Construction of a new police headquarters is complete and is on budget but plans to issue additional debt for a new fire station and several airport projects have been placed on hold until the city can fully assess the impact of Philip Morris' closure.

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