OREANDA-NEWS. Fitch Ratings has assigned a 'AAA' rating to the following Hanover County, VA (the county) bonds:

--\$23.9 million general obligation refunding bonds, series 2015.

The bonds are expected to sell the week of March 2, 2015. Proceeds will be used to refund outstanding obligations for debt service savings.

In addition, Fitch affirms the 'AAA' rating on \$88.2 million of outstanding general obligation bonds.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the county, backed by its full faith, credit, and unlimited taxing power.

KEY RATING DRIVERS

SOUND FINANCES: County finances are solid, aided by conservative budgeting practices and multi-year financial planning, and featuring strong reserves.

STRONG SOCIOECONOMIC INDICATORS; RECENT TAX BASE GROWTH: County income levels are above average, and unemployment is low relative to the state and nation. Taxable assessed value (TAV) has returned to growth after recent year declines.

LOW DEBT BURDEN: Debt ratios are expected to remain moderate even with additional debt issuance plans. Debt service as a percentage of governmental spending is midrange, but amortization is rapid. Overall carrying costs including debt service, required pension payments and other post-employment benefit (OPEB) payments are manageable.

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

Hanover County is located in central Virginia about 90 miles south of Washington D.C., and 12 miles north of Richmond, VA. The county's population, estimated at 101,330 in 2013 grew by about 17% from 2000 to 2013.

SOLID FINANCIAL PERFORMANCE

County finances are solid, aided by active management, conservative budgeting, and multi-year planning. The county has maintained strong reserve levels above the policy requirement of a minimal unassigned balance of 10% of revenues. Unassigned balances have been about 13% of revenues in recent years.

Fiscal 2013 ended with a modest general fund deficit, after transfers, of \$1.4 million or 0.7% of spending. This was significantly lower than the initially budgeted deficit of \$11.9 million, and reflected about \$4 million in capital spending. The general fund unrestricted ending balance was a strong \$43.4 million or 21.6% of spending. Fiscal 2014 ended with a general fund surplus after transfers (\$6.4 million or 3.3% of spending) vs. a budgeted deficit of \$8.7 million. This increased the general fund unrestricted ending balance to \$49.4 million or 25.1% of spending.

The county conservatively budgeted a \$7.8 million use of fund balance (3.6% of spending) for fiscal 2015, including a \$1.3 million contingency appropriation reserve. Estimates based on performance through December 2014 indicate revenues running ahead of budget, chiefly due to stronger property tax revenues, and lower than budget spending. Decreased expenditures resulted largely from lower staffing costs related to turnover and vacancies. Current fiscal 2015 projections based on this stronger performance indicate essentially balanced operations, though the county expects continued strong performance to yield a surplus by year-end.

Preliminary budget projections for fiscal 2016 indicate 3.6% growth in revenues over the fiscal 2015 budget, reflecting continued sales and property tax growth, and about 3.2% spending growth, driven by increased staffing costs, including additional public safety positions and salary increases. The budget includes a \$7.3 million use of fund balance, but the county does not expect that this will ultimately be needed. The county has a trend of conservative budgeting and actual financial results performing better than budgeted expectations. Fitch expects that the county will continue to maintain reserves at strong levels.

The county generates the majority of its revenue from property taxes (63% of fiscal 2014 revenues). The county's tax rate is competitive at \$0.81 per \$100 of assessed value, and is expected to remain at that level for fiscal 2016. The rate has been unchanged since fiscal 2007, providing a measure of financial flexibility going forward.

SOLID SOCIOECONOMIC INDICATORS

County economic indicators remain sound. Employment trends have been positive in recent years, with employment growth outpacing labor force growth, and unemployment declining. The county's December 2014 unemployment rate (4.0%) is down from 4.5% a year prior and remains below comparable state (4.5%) and national (5.4%) rates. County income levels are above average.

The county remains largely rural but is experiencing ongoing commercial and residential expansion, guided by a comprehensive plan that addresses schools, transportation and infrastructure needs. Recent development includes Health Corporation of America's \$10 million Hanover Emergency Center, a new \$6.5 million Richmond Harley-Davidson facility that includes an events space and motorcycle safety school, and a new 6,000 square foot facility for Pixel Factory Data Center. In addition, construction of a \$20 million OrthoVirginia / Bon Secours Richmond Health System medical facility was completed in January 2015.

LOW DEBT LEVELS; MANAGEABLE CARRYING COSTS

County debt levels are low at about \$1,528 per capita and 0.9% of market value in fiscal 2015. Debt service as a percentage of fiscal 2014 governmental spending is midrange at 9.8%, but amortization (about 69% of principal retired within 10 years) is rapid. Additional near-term debt issuance plans include about \$22.5 million to complete the funding for construction of a new \$44 million courthouse facility and \$17 million for school capital projects. County debt levels are expected to remain moderate even with these additional debt issuance plans.

The county participates in the statewide the Virginia Retirement System (VRS) an agent multiple-employer defined benefit pension plan. The county has been fully funding its required plan contribution, which represented a modest 3.5% of fiscal 2014 governmental spending. The funded ratio as of June 30, 2013 was 78.4%. The county also provides OPEB benefits to county retirees, with related payments in fiscal 2014 at 0.2% of governmental spending. Overall fiscal 2014 carrying costs, including debt service, required pension contributions and OPEB payments, are affordable at about 13.5% of governmental spending.