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Fitch Affirms Fresno County, California's Pension Oblig Bonds at 'A'; Outlook Stable.

SAN FRANCISCO -- As part of ongoing surveillance, Fitch Ratings has affirmed the 'A' rating on Fresno County, California's (the county) outstanding taxable pension obligation refunding bonds, series 2004. The Rating Outlook is Stable.

The 'A' rating on the pension bonds reflects the county's sound financial position, conservative management practices, low to moderate debt levels and an area economy centered around agriculture with below average wealth levels and above average unemployment. The rating also considers the strong legal structure of the pension bonds which constitute an absolute and unconditional obligation of the county. The county's ability to control spending and maintain fund balance levels in the face of a weakened revenue environment will be key to maintaining the current rating.

The county has maintained a sound financial position and at the end of fiscal 2008, audited total general fund balances stood at $189 million (14.3% of expenditures) and unreserved balances at $137 million (10.3%). Despite pressures to operations from the declining economy, the county contained costs for fiscal 2009 with the result that unaudited figures point to reserve levels similar to fiscal 2008; the total general fund balance is projected at $188 million (15% of expenditures) with an unreserved portion of $136 million (10.9%). The county has managed to maintain its financial position by cutting expenditures by $69 million in 2009 from 2008 levels, about a 5.2% reduction.

While economic pressures continue for fiscal 2010, the county's budget for the current year anticipates holding reserve levels relatively constant and limited growth in expenditures to just 1% over the prior year. Total property tax revenues for the general fund for 2010 are budgeted to decline 5% in addition to the 8% from the state borrowing under Proposition 1A. The county's assessed valuation for fiscal 2010 totals $60.8 billion, a 3% decline from last year, and is currently estimated to remain flat for fiscal 2011. The county has a policy of reducing costs consistent with revenue reductions and has lowered service levels, cut staffing (721 employees or 9.4%) and implemented a 40-hour per year furlough for most employees for fiscal 2010. Should revenues continue to be under stress beyond current expectations, the county anticipates further budget reductions through additional elimination of programs, staff layoffs and delayed capital projects.

The county's debt levels remain low to moderate with total overall net debt equal to 3.7% of assessed valuation and about $2,450 per capital. The county is not currently contemplating any additional debt issuances for at least the next five years except for its annual short-term cash flow borrowings.

Located in central California, halfway between Los Angeles and Sacramento, Fresno County (population of approximately 931,000) serves as the regional hub for services, commerce and trade of an area economy centered around agriculture. Reflecting the strong agricultural component of the area economy, unemployment rates consistently have been much higher than state and national levels. County unemployment rates currently stand at 15.2% (June 2009) compared to 11.6% for California and 9.7% nationally. Median household income levels are 77% of state and 90% of U.S. averages.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, ''. 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.
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Publication:Business Wire
Geographic Code:1U9CA
Date:Aug 28, 2009
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