OREANDA-NEWS. Fitch Ratings has assigned an 'AA+' rating to the following revenue bonds of Sarasota County, FL (the county):

--\$32,615,000 infrastructure sales surtax revenue refunding bonds, series 2015.

The infrastructure sales surtax bonds will be sold on a negotiated basis during the week of Feb. 23. Proceeds will be used to advance refund portions of outstanding infrastructure sales tax revenue bonds, series 2008A for debt service savings.

In addition, Fitch affirms the 'AA+' rating on following outstanding bonds:
--\$104.3 million outstanding infrastructure sales tax bonds.

The Rating Outlook is Stable.

SECURITY
The infrastructure sales surtax revenue refunding bonds are secured by the county's portion of a one-cent infrastructure sales surtax (sales surtax) levied by the county. Twenty-five percent of the tax proceeds are distributed to the Sarasota County School Board with the remaining proceeds divided between the county and its incorporated municipalities in accordance with an interlocal agreement that allocates revenues based on population.

KEY RATING DRIVERS

EXCELLENT CREDIT PROFILE: The implied unlimited tax GO (ULTGO) rating of 'AAA' reflects the county's superior financial management, generally modest debt structure and diverse and growing economic base.

VERY HEALTHY FINANCIAL POSITION: County finances are characterized by robust reserve levels, conservative budgeting practices and ample liquidity. Management has instituted financial policies designed to provide a strong base of reserves sufficient to maintain service levels after a natural disaster, economic downturn or after other unforeseen events.

SUSTAINED ECONOMIC RECOVERY: Employment continues to expand at a healthy clip sustaining the positive trends which began in 2011. Other indicators such as sales tax growth and an uptick in home prices are also indicative of strengthening economic activity.

STRONG COVERAGE OFFSETS VOLATILITY: Infrastructure sales surtax collections continue to rebound from precipitous recession-driven declines boosting debt service coverage to a solid 2.4x maximum annual debt service (MADS).

RATING SENSITIVITIES

SUBSTANTIAL RESERVE DRAWDOWNS: Large ongoing deficits which deplete financial reserves below a level consistent with the rating could result in negative rating action on the implied GO and revenue bonds.

NARROWED DEBT SERVICE COVERAGE: Pledged sales surtax declines which squeeze debt service coverage would be viewed as a negative credit development.

CREDIT PROFILE

Sarasota County is located in southwest Florida, along the Gulf of Mexico. Encompassing 563 square miles, the county is 50 miles south of Tampa. Four municipalities are situated within the county, including the City of Sarasota, the largest city and county seat. Population growth was extremely rapid between 1950 and 2000 averaging over 2% annually. Since then, growth has levelled off but remains steady. The county's estimated 2014 population of 390,429 represents a 2.9% increase since 2010.

SOLID INFRASTRUCTURE SALES TAX DEBT SERVICE COVERAGE

Infrastructure sales tax revenues maintained its brisk upward trajectory expanding by 7.8% in fiscal 2014. This growth followed a healthy 7% increase in fiscal 2013 and represents the fourth consecutive year of revenue gains. Collection trends have exhibited significant past volatility, declining 28% between fiscals 2006 and 2010. The recent expansion has pushed up collections to over 90% of their pre-recession peak levels. Year-to-date 4-month actual collections for fiscal 2015 are up a sound 6.3% over same period collections in fiscal 2014. The sales surtax expires on Jan. 1, 2025 while the bonds fully mature on Oct. 1, 2024.

Debt service coverage levels of infrastructure sales surtax bonds are strong. Based on fiscal 2014 collections, coverage of MADS equals a healthy 2.4x. Fitch considers the 1.35x MADS additional bonds test thin but management has no immediate plans to significantly leverage that revenue stream. No debt service reserve fund (DSRF) is provided for this issue unlike the series 2008A infrastructure sales tax bonds, which have a dedicated cash-funded reserve.

ECONOMIC INDICATORS UNDERSCORE SUSTAINED RECOVERY

The county's service-oriented economy spans the health care, education, professional and business services, retail and tourism sectors. There is significant manufacturing as well. After being battered by the recession and its aftermath, the county's economy appears to be experiencing a sustained recovery.

Between 2006 and 2010, the county lost approximately 24,000 jobs or 14% of the employment base. Job growth resumed in 2011 and has since accelerated. Employment gains of 3.3% and 3.5% in 2012 and 2013, respectively, have attested to the increased pace of growth. The upward trend has extended in 2014 with November 2014 job numbers up 5.1% over November 2013 jobs data. The employment growth has nudged unemployment rates down from nearly 11% in 2011 to 5.3% this past November, below the state and national rates. Sizable increases in building permit activity and a substantial rise in sales tax collections are additional indicators of economic expansion. Tourism reported a very strong fiscal 2014 with tourist development tax collections up 14% over the prior year.

HOUSING AND TAXABLE VALUES MAKE A STRONG COMEBACK

Housing values declined by over 50% between 2006 and the end of 2011, according to Zillow.com. However, beginning in 2012, values have steadily increased and were up 16% year over year as of December 2014. Despite the gains, housing levels remain significantly below pre-recession highs. A number of substantial housing and commercial projects in development also attest to the expansive housing climate. The county's mostly residential tax base reflects the area housing collapse as well as its subsequent rise. Taxable valuations lost nearly 38% of value between fiscals 2008 and 2013. This pattern was reversed in fiscal 2014 with a 4% annual increase followed by a further 6.3% gain in fiscal 2015. Officials predict solid growth through fiscal 2020 based on state projections which Fitch believes is reasonable given the recent positive economic trends.

AFFLUENT AND OLDER POPULATION

County wealth indices are above the state and national averages, buttressed by a significant population of affluent retirees. According to the U.S. Census' State and County QuickFacts, approximately 33% of county residents are over 65 years old compared to the Florida average of 19%. The county's population escalated rapidly during the early part of the past decade but growth has subsided more recently.

VERY STRONG FINANCIAL PROFILE

Financial operations are well-maintained as evidenced by abundant reserves, conservative budgeting practices and high levels of liquidity. Since fiscal 2007, the county experienced a 40% drop in property tax revenues attributable in part to severe tax base declines and the county's decision to modestly lower general government tax rates during this period. In response, management implemented cost saving measures to maintain structural balance, including workforce reductions, expenditure cuts and wage and hiring freezes. Since fiscal 2007, the county sliced full-time employee positions (FTEs) by over 700 or 18% of total FTEs. As a result, general fund operating expenditures and transfers out fell by \$18 million or 8.3% of total spending between fiscals 2009 and 2012. County employment and expenditures increased modestly in fiscal 2013.

Management made the policy decision to utilize a portion of available fund balance to support operations, after building up reserves in fiscal 2009. However, the county typically budgets very conservatively and actual results invariably outperform the budget.

COUNTY EXPECTED TO MAINTAIN LARGE FINANCIAL CUSHION

The county budgeted a \$23 million general fund net deficit for fiscal 2012 but registered a much smaller \$9.2 million drawdown. The fiscal 2012 unrestricted general fund balance of \$139 million represented nearly 60% of expenditures and transfers out.

The adopted fiscal 2013 general fund budget proposed a \$32 million drawdown. Actual results improved upon budget with a drawdown of \$13.8 million. Sales tax revenues outperformed budget by \$2 million while expenditures were \$14.5 million under budget due to conservative budgeting. Fiscal 2013 unrestricted general fund balance totalled \$125.7 million or a still robust 49% of spending. Liquidity remains solid with unrestricted cash and investments representing over six months recurring operating costs.

Another large drawdown was budgeted for fiscal 2014. Actual results show a much smaller use of reserves of \$17.3 million. Year-end unrestricted general fund balance was reduced to \$106.4 million or a still-healthy 43% of expenditures and transfers out. Higher than budgeted property tax revenues and state revenue sharing combined with below-budget spending to narrow the deficit. While another large deficit was budgeted for fiscal 2015, management notes that revenues are coming in ahead of budget and expects the year-end deficit to be much lower, possibly less than \$10 million.

Fitch believes that the county will continue to maintain sizable reserve balances due to its conservative budgeting practices and prudent financial reserve policy. The policy requires the county to maintain a disaster recovery fund for natural disasters at a level equal to 75 days of operations and an economic uncertainty fund sufficient to cover 30-60 days of operations. Management indicates that the disaster fund is currently maintained at 75 days of operations while the economic uncertainty fund is funded at 30 days of operations. Together, these dedicated reserves serve as the county's informal minimum general fund balance. Management expects to achieve balanced operations in fiscal 2016 after which it will need to raise tax rates or lower spending to prevent a further draw on reserves.

MANAGEABLE DEBT

Debt levels are relatively modest with total debt to market value at 1.2% and debt per capita of \$1,631. The county has no ULTGO bonds outstanding but relies upon limited ad valorem debt and revenue-secured bonds to fund its capital program. All bonds are fixed rate and amortization is above average with 75% of principal maturing within 10 years. Debt service carrying costs represent a modest 7% of government fund expenditures.

The county's five-year capital plan proposes an affordable \$360 million of funded capital projects with most of the spending slated for transportation and utility projects. County debt plans over the next few years include about \$40 million of financings. Significant projects include \$20 million of utility fund revolving loans, \$8.4 million for wastewater projects and \$5 million in a new tax collector facility. Management intends to issue commercial paper to initially fund these projects, secured by non-ad valorem revenues, to be refinanced later into longer term debt.

RETIREMENT LIABILITIES DO NOT REPRESENT A COST PRESSURE

Retirement obligations are not considered to be a cost pressure. All employees except firefighters participate in the Florida Retirement System (FRS), a state-administered defined benefit pension plan. FRS is relatively well-funded with a funding ratio estimated at 79% as of June 30, 2013 using Fitch's more conservative 7% discount rate. The county and city of Sarasota's firefighting departments merged in 1996 and by agreement, the county funds a majority of the plan. As of fiscal 2013, the funding ratio for the firefighter's plan at the assumed 7% discount rate improved from 57% last year to 67% due mainly to sizable investment gains. The plan is closed with eight more years of amortization. County contributions to both plans in fiscal 2013 totalled \$25.5 million or a moderate 5.6% of general government spending.

The county provides an implicit subsidy to its retirees for health benefits by allowing them to participate in the county's healthcare plan at the same cost applicable to current employees. In 2008, the county established an OPEB trust fund which is administered by the Florida League of Cities. The county has contributed in excess of the annual required contribution (ARC) and was 97% funded as of July 2014. ARC requirements are minimal, representing less than 0.1% of fiscal 2014 general fund spending.