OREANDA-NEWS. March 30, 2015. Fitch Ratings affirms the following Tulare County, California (the county) ratings:

--Implied general obligation (GO) at 'AA-';
--\\$11.5 million 1998 certificates of participation (COPs) at 'A+'.

The Rating Outlook is Stable.

SECURITY

The COPs are backed by the county's covenant to annually budget and appropriate lease rental payments for the use and occupancy of certain essential governmental facilities, subject to abatement, and are supported by standard insurance requirements and a cash-funded debt service reserve fund.

KEY RATING DRIVERS

STABLE AGRICULTURAL ECONOMY: Tulare County's economy is primarily based on agriculture with correspondingly low income and wealth levels, as well as high unemployment. The county's economy has benefited from continuing strong demand for agricultural commodities but faces risks from prolonged drought conditions.

HEALTHY FINANCIAL POSITION: The county has maintained consistently balanced operations. Unrestricted general fund balances are healthy and the county retains considerable financial flexibility.

MANAGEABLE LONG-TERM LIABILITIES: Overlapping debt levels are low and outstanding direct debt amortizes rapidly. Carrying costs for debt service and retiree benefits are low.

RATING SENSITIVITIES

FINANCIAL POSITION KEY: Deterioration in the county's financial position, whether due to drought impacts or other factors, would result in downward rating pressure. Continued stable operations and increases in reserves, conversely, would add upward rating pressure. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Tulare County is located near the geographic center of California and has a population of approximately 450,000. The county's borders stretch from the Central Valley to the peaks of the Sierra Nevada Mountains, and include large portions of national forests and parklands. The local economy is concentrated in the agricultural sector and Tulare County is the largest producer of dairy products in the U.S., with milk production alone valued at \\$2.1 billion in 2013, and total agricultural production nearing \\$8 billion.

STABLE ECONOMY; DROUGHT RISKS

Consistent with this agricultural context, wealth and income levels for county residents are low, at 60 - 80% of state and national averages. Unemployment rates have consistently exceeded national benchmarks and remain very high at 13.9% as of January 2015. Total employment and labor force levels have declined approximately 2% to 3% over the past year, which may reflect drought-related cuts in agricultural production. Population growth has been relatively high at about 1.9% annually, roughly double state and national rates.

Taxable assessed values (TAV) were generally stable through the last recession and have seen moderate growth in its wake, supported by strong demand for agricultural properties and a limited rise in residential values prior to the downturn. Fiscal year 2015 TAV levels were nearly 7% higher than 2009's pre-recession peak.

The county's stable economy could be tested by California's extended drought. Water allocations to many area farmers have been severely cut for a third consecutive year, resulting in increasing acreage pulled from production. Strong prices for agricultural commodities have helped to mitigate economic losses to date, but a persistent drought has the potential to reduce land values and property tax revenues over the long-term.

HEALTHY FINANCIAL POSITION

The county recorded a general fund surplus after transfers in each of the past four fiscal years and is on track for continued surplus performance in fiscal 2015. Unrestricted fund balance of \\$77.2 million at the end of fiscal 2014 was equivalent to 13.1% of general fund spending. Ongoing management actions to align expenditures and revenues have supported these results, as has a strong rebound in tax revenues, which increased at a 4.9% compound annual growth rate over the past five years. A planned expansion of the county's jail capacity could increase expenditure pressures but will not become operational for several years. Fitch expects the county to maintain balanced operations despite such challenges based on its strong record of reducing spending to match available resources.

LIMITED LONG-TERM LIABILITIES

The county has limited exposure to long-term liabilities. Debt levels are fairly low, with overall debt at \\$1,494 per capita or 2.4% of AV. Amortization is rapid with 88% of direct debt due for payment within five years. The county's pension plan is adequately funded at an estimated 81% of liabilities under Fitch's 7% investment return assumption. Liabilities for other post-employment benefits are limited to the cost of an implicit subsidy for retirees who participate in the county's group health insurance plan at their own cost. Carrying costs for debt service and retiree benefits were notably low at 6% of governmental expenditures in fiscal 2014.