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Fitch Rates Charles County, Maryland's GOs 'AA+'; Stable Outlook.

NEW YORK -- Fitch Ratings assigns an 'AA+' rating to Charles County, MD's (the county) approximately $53 million in general obligation (GO) bonds, consisting of $43 million in consolidated public improvement bonds of 2006 (tax-exempt) and $10 million in public improvement bonds of 2006 (taxable). Fitch also affirms the 'AA+' rating on the county's $191 million of outstanding GO debt. The Rating Outlook is Stable.

The bonds are scheduled for competitive sale on March 13. The proceeds of the tax-exempt bonds will be used to finance various capital projects. The taxable bonds will finance road projects through an agreement with American Community Properties Trust, a private developer.

The 'AA+' rating reflects Charles County's strong financial performance guided by sound fiscal policies, continued tax base growth, and manageable debt levels. The county was able to maintain its financial flexibility despite the Chapter 11 bankruptcy filing by the parent of the county's largest taxpayer, Mirant Mid-Atlantic Generation LLC (Mirant). Mirant has subsequently emerged from bankruptcy and is current on its county tax obligations. Fitch's near-term concerns regarding the impact on the Indian Head Naval Surface Warfare Center (NSWC), the county's largest employer, have been mitigated as recent base realignment and closure (BRAC) recommendations call for a reduction of only approximately 100 direct jobs at the facility. Upward movement in the rating remains hindered by an economy that is growing rapidly and predominately residential in nature.

Charles County remains a relatively affordable Washington, D.C. suburb, exporting about one-half of its workforce within the capital region. Efforts to diversify the economy are ongoing with several projects under way, adding class A office and industrial/flex space for technology and research and development related opportunities. The county's unemployment rate in December 2005 was a low 2.8%, well below the state and national averages. Per capita personal income in 2003 equaled 89% and 106% of the state and national averages, respectively.

Financial management is strong, affecting current operations positively and guiding long-range planning efforts. County fund balances are consistently sound, exceeding the policy goal of 8% of operating revenue since at least fiscal 1997. The unreserved fund balance for fiscal 2005 equaled $40.6 million, or 17.5% of expenditures and transfers out, up significantly from $15.5 million and 7.3% of expenditures in fiscal 2004 due to conservative budgeting and significant increases in recordation and income tax receipts. A surplus of nearly $17 million is projected at the close of fiscal 2006 reflecting receipt of Mirant's fiscal 2004 tax payment of approximately $16 million, which had been held up by bankruptcy proceedings. The county maintains additional financial flexibility through its income tax rate, which at 2.9% remains below the state mandated cap of 3.2%.

Direct debt levels are moderate, net of self-supporting enterprise-related debt, at 1.5% of market value and $1,242 per capita. The county's policy of issuing bonds with maturities no longer than 15 years results in rapid repayment of outstanding debt, with 78% amortized in 10 years. The fiscal years 2006-2010 capital improvement plan (CIP) totals $457 million and will be funded by bonds (32% general fund supported and 25% self-supported), non-county sources (34%), and pay-as-you-go sources (9%).

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.
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Publication:Business Wire
Date:Mar 8, 2006
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