OREANDA-NEWS. Fitch Ratings has assigned a rating of 'AAA' to the following bonds to be issued by Henrico County, Virginia (the county):

--\$72.2 million general obligation (GO) public improvement refunding bonds, series 2015.

The bond proceeds will be used to refund a portion of the county's outstanding GO bonds for debt service savings without extending final maturity. The bonds are expected to sell via negotiated sale during the week of Feb. 23.

In addition, Fitch affirms the following ratings:

--\$369.8 million GO bonds at 'AAA';
--\$24.6 million Virginia Public School Authority GO bonds, series 2008 at 'AAA';
--\$26.9 million Economic Development Authority of Henrico County (EDA) lease revenue bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The GO bonds are general obligations of the county and the full faith and credit of the county will be irrevocably pledged.

The lease revenue bonds are payable by rental payments made by the county to the EDA, subject to annual appropriation. Bondholders also have a leasehold interest on certain government assets.

KEY RATING DRIVERS

DIVERSE ECONOMY: The county's diverse economic base, ample land supply and favorable location within the Richmond metropolitan area promote continued development and expansion. The broad employment base supports relatively low unemployment rates and above-average wealth levels.

LOW DEBT BURDEN: Overall debt levels are expected to remain low due to the county's limited debt plans, rapid amortization of principal, commitment to pay-as-you-go capital funding, and adherence to prudent debt guidelines.

FINANCIAL PROFILE REMAINS STRONG: Continued strong financial management and planning has contributed to ample reserve levels and controlled expenditure growth.

EDA DEBT NOTCHED FROM GO: The lease revenue bonds are notched down from the GO rating of the county, reflecting the distinction in legal commitment to repayment, most notably that rental payments supporting the lease revenue bonds are subject to annual appropriation. Bondholders have a leasehold interest in certain public safety facilities and a parking deck with a book value well in excess of outstanding par providing sufficient incentive to appropriate.

RATING SENSITIVITIES

The rating is sensitive to shifts in fundamental credit characteristics including the county's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Henrico County benefits from its location surrounding Virginia's capital of Richmond (GO bonds rated 'AA+', Outlook Stable) on the northern side of the James River. The county's 2013 population was 318,611, an increase of 21.5% since the 2000 census.

ROBUST ECONOMY
The local employment base is substantial and diverse representing about one-third of the Richmond metropolitan statistical area's employment base. Two fortune 500 companies, Altria and Genworth, base their headquarters in Henrico County. Capital One and Wells Fargo, the county's second and eighth largest employers, respectively, have both established call centers in the county in recent years.

Unemployment has remained consistently below that of the nation, as evidenced by the county's November 2014 unemployment rate of 4.5%, compared to the national average of 5.5%. Wealth indicators are above average, with a per capita money income 17.6% greater than the national average.

The county's tax base continues to recover following modest to moderate recessionary declines. The 2014 taxable assessed valuation (TAV) increased 3.1% from the prior year after marginal growth in 2013.

PRUDENT FISCAL MANAGEMENT
Strong financial management is reflected in high reserve levels, detailed planning, and stringent expenditure controls. The county has consistently complied with its guideline to maintain unassigned fund balance at 15% of general fund and school district expenditures. Any unassigned reserves over the guideline level are assigned to capital projects.

Fiscal 2014 ended with an \$8.2 million general fund operating surplus after transfers, resulting in an unrestricted general fund balance of \$195.7 million or an ample 30.3% of spending. The majority of the county's revenues are generated from property tax revenues (55.8% in fiscal 2014). The county's real estate tax rate is competitive with those of similarly sized localities at \$0.87 per \$100 of TAV and has not been increased since 1979. Property taxes levied for operations are not subject to statutory or charter limit with respect to rate or amount.

The fiscal 2015 budget was adopted with no tax rate increase and a \$21.7 million appropriation of fund balance, reflecting the county's historically conservative budget practices and continued funding of pay-as-you-go capital projects. Budgeted general fund revenues have increased 4.9% from the prior year and are primarily driven by the introduction of a 4% meals tax and an expected increase in gas tax revenues from the state. Year-to-date results indicate both revenues and expenditures tracking well compared to the budget and county management anticipates adding to fund balance at year end.

FAVORABLE DEBT PROFILE
The county's strong debt profile is supported by adherence to conservative guidelines and rapid amortization. The county's overall debt burden has remained consistently low at \$1,709 per capita and 1.5% of market value. Principal is retired at 77.5% within 10 years.

The debt burden is expected to remain low as the county has continued funding many of its capital needs using pay-as-you-go financing.

The capital improvement plan (CIP) totals \$1.82 billion, of which \$1.37 billion is related to general capital projects. The county intends to prioritize necessary projects in the CIP and historically funds most capital needs on a pay-as-you-go basis. The plan includes \$60.9 million in debt financing for general capital projects. The county is expecting to issue \$39.1 million in debt later this year to replace the regional public safety radio dispatch systems.

County employees participate in the statewide Virginia Retirement System (VRS), an agent multi-employer defined benefit plan. The county makes annual payments as determined by the state that equal its annual required contribution (ARC). The county's portion of the plan is funded at 71.9%, reflecting the plan's assumed 7% investment return assumption. The county pays in excess of its pay-as-you-go amount for other post-employment benefits (OPEB) and the unfunded actuarially accrued liability of \$55.6 million represents a modest 0.2% of market value. Carrying costs (including debt service, pension, and OPEB) accounted for an affordable 16.4% of general government spending in fiscal 2014 despite rapid principal amortization.