OREANDA-NEWS. Fitch Ratings assigns an 'AA+' rating to the following general obligation (GO) bonds of Queen Anne's County, Maryland (the county):

--\$12,200,000 public facilities bonds of 2015;
--\$14,175,000 public facilities refunding bonds of 2015.

The proceeds of the public facilities bonds will be used to finance various county capital projects. The proceeds of the public facilities refunding bonds will be used to refund the county's outstanding public facilities bonds of 2006 for debt service savings. The bonds will be offered by the county through a competitive sale on May 5, 2015.

In addition, Fitch affirms the following ratings:

--\$105.4 million GO bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY
The bonds are general obligations of the county, payable by its full faith and credit and unlimited tax pledge.

KEY RATING DRIVERS

IMPROVED FINANCIAL POSITION: Following notable expenditure reductions and revenue enhancements the county has maintained structural balance with realistic revenue forecasting and expenditure controls. Available general fund reserves are solid and liquidity is ample.

STRONG ECONOMIC CHARACTERISTICS: The county benefits from its close proximity to both Baltimore and Washington D.C. Key economic and demographic factors (including employment, wealth indicators, and educational attainment) consistently exceed the state and nation.

DEBT TO REMAIN AFFORDABLE: Overall debt levels are moderately low and should remain so given the county's limited future borrowing plans.

LOW CARRYING COSTS: Carrying costs including debt service, pension, and other post-employment benefits (OPEB) are affordable but expected to increase modestly as the county assumes a greater share of teachers' pension costs.

RATING SENSITIVITIES

FISCAL MANAGEMENT: The rating is sensitive to management's ability to continue to maintain its improved financial position and stable operations with recurring budget solutions. The Stable Outlook reflects Fitch's expectation that such shifts are not expected.

CREDIT PROFILE
Queen Anne's County is located on the eastern terminus of the Chesapeake Bay Bridge, directly across the bay from Anne Arundel County. Population growth has been strong, increasing 20% since 2000 to an estimated 48,804 as of 2014.

POSITIVE OPERATIONS CONTINUE
A combination of spending cuts, conservative budgeting and revenue enhancements reversed the negative operating trends experienced during the recession, returning the county to positive operations over the last three years. The fiscal 2014 net operating surplus after transfers was \$2.4 million, equivalent to 2.1% of spending. The positive year end result was inclusive of a notable \$8.4 million in pay-as-you-go capital spending.

The county's unrestricted general fund balance at fiscal year-end 2014 was \$9.6 million or 8.4% of spending. The reserved portion of the general fund balance includes a rainy day fund totaling \$8.2 million, boosting the county's available resources to a solid 15.6% of spending. The county reinstated its policy of maintaining a rainy day reserve of 7% of budgeted general fund revenues in the restricted portion of general fund balance in fiscal 2013.

Property taxes represent approximately 56% of general fund revenue. Fitch views the county's regionally competitive property tax rate as an important measure of financial flexibility given its dominance as a source of general fund revenues. There are no statutory restrictions on property tax growth. Income taxes represent roughly 35% of general fund revenues. In fiscal 2012, the county raised the income tax rates, to the maximum level of 3.2%.

The fiscal 2015 budget was balanced without the use of fund balance or any revenue enhancements. The budget represents a 4.2% increase in spending over the 2014 budget. Year-to-date fiscal 2015 operating performance shows an estimated surplus of \$2.9 million due to positive property and income tax variances and under spending of the budget.
ECONOMY LINKED TO BALTIMORE-WASHINGTON MARKET
The county benefits from its proximity to Baltimore and Washington D.C., with approximately 83% of the labor force commuting to jobs outside of the county. The county's unemployment rate of 5.2%, as of February 2015, has consistently ranked below those of the region, state and nation. Wealth levels are above the state and national averages.

FAVORABLE DEBT PROFILE
Debt levels are moderately low at 1.6% of market value and \$2,609 per capita. Debt levels should remain affordable given the county's manageable capital needs, and adopted debt policies limiting GO debt to a moderate 2.5% of county TAV and \$3,000 per capita.

The capital plan for fiscal years 2015-2020 totals \$118 million, with maintenance upgrades to emergency facilities, a new courthouse, and school renovations representing the majority of the plan. Bond proceeds represent roughly \$51 million of the program financing, which would not materially alter the town's debt profile.

The county contributes to the State of Maryland Employees Retirement and Pension System and makes all annually required contributions. Funding for county employees and teachers accounted for 3.3% of total governmental spending in fiscal 2014. The funding for the state's pension obligations for state employees has begun to improve after a decade of weakening that resulted from an actuarial contribution methodology now being phased out and market losses in the last downturn. The system-wide funded ratios were 64.9% for state employees and 68.7% for teachers as of June 30, 2014, when adjusted by Fitch to a more conservative 7% discount rate assumption.

Additionally, the county has created an OPEB trust and expects to fully fund the OPEB actuarial required contribution (ARC) by 2023. The county funded 18.1% of the OPEB ARC in fiscal 2014. Carrying costs for debt service, pension (including teachers' pension costs) and OPEB totaled a low 13.9% of governmental spending in fiscal 2014.