OREANDA-NEWS. Fitch Ratings affirms the 'AA-' rating on the following Fulton County, GA (the county) revenue bonds:

--Approximately \$454.5 million water and sewerage revenue refunding bonds series 2011 and 2013.

The Rating Outlook is Stable.

In addition, Fitch Ratings has withdrawn the ratings for the following Fulton County (GA) bond due to prerefunding activity:

-- Water & wastewater revenue bonds series 2004 (all maturities).

The updated rating history for the above maturities is now reflected on Fitch's web site at 'www.fitchratings.com'.

SECURITY

The bonds are supported by the net revenues of the county's water and sewer system (the system).

KEY RATING DRIVERS

HIGH LIQUIDITY; LOW COVERAGE: The county's elevated cash balances provide substantial financial flexibility and a crucial offset to below average debt service coverage (DSC). Fitch expects that cash levels are likely to decline over time given a lack of planned rate increases and management's intent to cash-fund the majority of the system's capital needs.

ELEVATED DEBT TO DECLINE: Key debt ratios are elevated but are expected to decline through 2019 with no additional debt issuances expected. The county's capital improvement program (CIP) largely focuses on system renewal and is projected to be funded on a pay-as-you-go basis, which should further improve debt ratios over time.

SOUND ECONOMIC FUNDAMENTALS: The county's combined water and sewer system provides an essential service to a broad and diverse service area.

RATING SENSITIVITIES

STRONG CASH BALANCES REMAIN KEY: The rating hinges on the maintenance of cash levels consistent with or above the 'AA' rating median given the expectation of only narrow projected DSC margins through the fiscal 2019 forecast.

CREDIT PROFILE

The water and sewer system's customer base is primarily residential and serves approximately 70,600 and 88,200, respectively. Customers are located mostly in the northern and southern parts of the county and include some who reside within the city limits of Atlanta (the city). The customer base is diverse, with the largest users accounting for roughly 3% of total revenues in 2013. Growth in the system's service area was moderate for much of the prior decade due to lower economic growth.

LOWER COVERAGE OFFSET BY CASH BALANCES

The system's overall financial performance remains adequate for the given rating level, although DSC is considered relatively narrow compared to peer utilities. In fiscal 2013 DSC resulted in 1.8x and management reports that fiscal 2014 (unaudited) coverage was 1.9x. Management expects DSC to approximate 1.25x through the fiscal 2019 forecast period as annual debt service ramps up in fiscal 2015 to \$36.8 million, or a high 33% of expected annual gross revenues. No additional debt or rate increase plans are currently included in the five-year forecast. Management anticipates that moderate consumption and flat operating expense levels will support the low, albeit adequate, forecasted DSC levels through 2019.

The county's below-average DSC is mitigated by historically high cash balances that have exceeded 700 days' cash on hand (DCOH) since 2007. In fiscal 2013, a total of \$154 million in unrestricted cash equated to roughly 856 DCOH, well above the 'AA' median average of 398 DCOH. Unaudited results show that fiscal 2014 cash levels are expected to produce just over 900 DCOH. The maintenance of strong liquidity levels through the forecast period while cash-funding a significant portion of the CIP will be key in light of relatively low DSC expectations.

DEBT PROFILE TO IMPROVE FROM PAY-GO CIP

The 2015-2019 CIP totals \$258 million and is expected to be paid for primarily by unrestricted cash. The current CIP represents a 30% increase over the prior CIP as there is increased spending budgeted for the South Fulton pump station reliability project and inflow and infiltration projects. The majority of the CIP includes repair and renewal needs that provide substantial flexibility for the county in determining capital outlays.

While the county has adhered to pay-go funding in recent years (the last new money issuance was in 2004), debt levels are moderate to high. Per capita and per customer debt levels are both over 1.8x the 'AA' categorical median, but should moderate somewhat over the next five years with no new planned issuances. Somewhat offsetting debt concerns, principal amortization and debt to net plant assets are in line with 'AA' category medians.

SUFFICIENT WATER AND SEWER CAPACITY

Treated water is purchased from the Atlanta Fulton County Water Treatment Plant (Atlanta/Fulton plant), which the county shares ownership of with the city. The county also sells water on a wholesale basis to the city of Roswell and to Forsyth County. Raw water is drawn from the Chattahoochee River just south of Lake Lanier and is treated by the Atlanta/Fulton plant, which has treatment capacity of 90 million gallons per day (mgd).

Fulton County's water demand varies and is sometimes regulated during drought conditions by county-wide water restrictions. Nonetheless, the system's water intake has averaged around 50% of the available treatment capacity of 90 mgd since fiscal 2009. County officials expect remaining capacity will be sufficient to meet customer demands for the foreseeable future due to only moderate growth pressure.

Wastewater collection and treatment is provided directly through the county's system and indirectly through treatment and disposal contracts with neighboring governments. The county's five wastewater treatment plants are reportedly in good operating condition and are well maintained. However, the county is moving forward with enhancements to certain facilities to improve reliability, redundancy and capacity constraints as the treatment plants are not fully interconnected. All required permits are reportedly in place and no significant regulatory issues exist.

SOUND ECONOMIC FUNDAMENTALS

Fulton County has a diverse economic base benefiting from Atlanta's role as the state capital and center of a broad regional economy. The county serves as a corporate headquarters for large employers including Coca-Cola, Bell South, Home Depot, and Delta Air Lines. Hartsfield-Jackson International Airport (Hartsfield), the world's busiest airport, is also located within the county.

Despite the presence of Atlanta and its numerous large employers, the county's Oct. 2014 unemployment rate of 7.8% (down from 9.3% two years prior) is higher than the state's Oct. 7.2% average and above the 5.7% national rate. Nevertheless, Fitch believes the presence of various state, federal, health and educational institutions bolsters the county's longer-term economic prospects. County wealth levels are positive; median household income is about 17% and 7% higher than the state and nation, respectively.