OREANDA-NEWS. Fitch Ratings has assigned an 'AA' rating to the following limited obligation bonds (LOBs) of Pitt County, North Carolina (the county):

--\$34.7 million refunding LOBs series 2015.

Bond proceeds will be used to refund various series of LOBs for debt service savings. The bonds will be sold competitively on Feb 18.

In addition, Fitch affirms the following ratings:

--\$56.9 million LOBs at 'AA';
--\$86.2 million certificates of participation (COPs) at 'AA';
--Implied unlimited tax general obligation (ULTGO) rating at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The COPs and LOBs are secured by payments subject to appropriation, and a deed of trust provides security interest in essential government assets.

KEY RATING DRIVERS

SOLID FINANCES: The county's financial condition is sound; healthy fund balances that have increased significantly in recent years provide ample flexibility.

REGIONAL HUB: Pitt County serves as the main economic center for northeastern North Carolina. Wealth indicators are below state and national averages, although they are somewhat skewed by a large student population. Unemployment is below the national average.

FAVORABLE DEBT PROFILE: With a low overall debt burden, affordable future borrowing plans and modest pension and OPEB liabilities, the county's debt profile is expected to remain stable.

APPROPRIATION LIEN ON ASSETS: The one-notch distinction between the implied ULTGO rating and the 'AA' rating on the COPs and LOBs reflects the appropriation risk inherent in the installment payments to be made by the county. This risk is somewhat offset by a security interest in the essential leased asset (DH Conley High School) for bond and certificate holders, as evidenced by a deed of trust.

RATING SENSITIVITIES

EXISTING RESERVES PROVIDE A SOUND FINANCIAL CUSHION: The rating is sensitive to shifts in fundamental credit characteristics, including the county's strong financial management practices and healthy reserve levels. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely over the next review cycle.

CREDIT PROFILE

Located 90 miles east of Raleigh (Fitch GO bonds rated 'AAA', Stable Outlook), Pitt County is a rapidly growing retail, commercial, healthcare, and education center for northeastern North Carolina. As one of the fastest growing counties in the state, the population increased by 3.6% between 2010 and 2013. Management attributes population growth to affordable land, new schools and a good transportation system in the southern part of the county.

POSITIVE OPERATING RESULTS AFTER SEVERAL YEARS OF RESERVE DECLINES

Conservative budgeting and spending cuts allowed the county to realize annual operating surpluses over the past three fiscal years. During fiscal 2014, completion of a defeasance of outstanding hospital bonds resulted in a gross economic gain of approximately \$7.4 million which was added to fund balance. The unrestricted general fund balance increased to \$26.6 million or an ample 20% of general fund spending (net of financing activities).

The county's statutorily required reserve, which is primarily to offset accounts receivable, is a source of additional financial flexibility. This reserve totaled \$8.9 million at fiscal year-end 2014, or an additional 6.6% of spending. The county has a goal of unassigned general fund balance as a percent of spending of 18-20%. As of fiscal 2014, the county was in compliance with its goal.

The adopted fiscal 2015 budget is a 2% increase over the prior year, keeps the property tax rate flat and includes a \$2.8 million fund balance appropriation. The budget funds increases to staffing for public safety and human services and funding increases to both Pitt County Schools and Pitt Community College. Year-to-date operations reportedly are tracking positively to budget due to vacancies and conservative budgeting.

PROPERTY TAX PROVIDES STABILITY

Property tax revenues are the county's largest operating revenue source at 60%. Following a 3.8% cumulative decline between 2011 and 2013, taxable assessed value (AV)increased 2.9% in fiscal 2014. The county's property tax rate is average compared to similar-size neighboring communities at \$0.68, and is well below the statutory cap of \$1.50 per \$100 of AV. As a result of the state's new vehicle registration and tax program and increased collections staffing, the county's total tax collection rate increased to 99% in 2014 from 97% a year prior.

REGIONAL ECONOMY

The employment base is diversified, with services, healthcare, wholesale/retail trade and education each accounting for at least 15% of total employment. The county's employment base has increased consistently over the past five years, which is reflected in the lower unemployment rate. As of November 2014, the local unemployment rate of 5.3% was a notable improvement from the 6.9% a year prior, and was on par with the state's average of 5.3% and below the national rate of 5.5%. Major employers include Vidant Medical Center (6,895 employees), East Carolina University (5,564 employees), Patheon (900 employees) and NACCO (1,000 employees). Several of the county's largest employers continue to expand their operations with additional reported investments.

FAVORABLE DEBT PROFILE; AFFORDABLE LONG-TERM LIABILITIES

Overall debt levels are modest at 1.3% of market value and \$915 per capita. Debt service represented a manageable 11.5% of fiscal 2014 total governmental spending. The pace of amortization is average.

The county's five year capital improvement plan totals \$152.6 million and is 47% debt funded. Proposed borrowings focus primarily on Pitt Community College and Pitt County Schools capital projects. The county has authorized but unissued general obligation bonds totaling \$19.9 million for community college improvements, which may be sold as early as fiscal 2016.

Pension and other post-employment benefits (OPEB) benefits continue to be generally well managed. The county contributes to five retirement plans including the state sponsored Local Government Employees' Retirement System (LGERS). The county's fiscal 2014 total contribution was an affordable \$7.6 million or 4.8% of governmental spending. For OPEB, the fiscal 2014 annual contribution represented less than 1% of spending.