OREANDA-NEWS. Fitch Ratings has assigned an 'AAA' rating to the following Salt Lake County, Utah (the county) general obligation (GO) bonds:

--\$13.9 million GO refunding bonds, series 2015.

The bonds are expected to sell via competitive sale on May 12. Proceeds will advance refund outstanding GO debt for interest savings.

The Rating Outlook is Stable.

SECURITY
The GOs are payable from an unlimited property tax levied on all taxable property in the county.

KEY RATING DRIVERS

SOUND FINANCIAL PROFILE: The county's financial position benefits from a solid general fund balance, structurally balanced operations after a fiscal 2013 property tax hike, satisfactory liquidity, and prudent financial management practices. However, out-year inflationary expenditure pressures could outstrip projected revenue gains absent further tax increases or expenditure cuts.

SOLID AND DIVERSE ECONOMY: The regional economy is large, diverse, and well-positioned for long-term growth. Unemployment is very low, home prices are continuing to recover, albeit at a slowed rate, and large-scale private and governmental capital investments are continuing.

STRONG DEBT PROFILE: Debt levels are low and direct principal amortization is rapid. Manageable capital needs will mostly be funded on a pay-as-you-go basis, debt plans are affordable, and the county's primary pension system is well-funded with no significant rate increases anticipated from current levels.

PRUDENT MANAGEMENT PRACTICES: Financial management policies are sound, as demonstrated by conservative budgeting practices, recent years' OPEB reforms, significant use of pay-as-you-go capital financing, and a prudent minimum reserve level that has been regularly exceeded.

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

CREDIT PROFILE

STRONG LOCAL ECONOMY SET FOR CONTINUED GROWTH
Salt Lake County encompasses a significant portion of the state's total population and economic activity. Local economic indicators are strong overall, with February unemployment falling to an extremely low 3.6% from 4.3% the year prior due to expanding employment. Unemployment compares well to the nation's 5.8% rate, and is similar to the state.

The county is well positioned for continued population and economic growth given ample developable land, substantial capital investments, and a positive business climate. Fiscal 2014 assessed valuation (AV) levels increased by a robust 7.1%, reflecting new construction and recovering home prices following the housing-led recession. Nonetheless, AV is still roughly \$10 billion below its pre-recessionary peak.

The positive revenue impact of the fiscal 2014 AV gain will be largely offset by Utah's Truth in Taxation process under which the certified tax rate is set to achieve the prior year's tax levy, plus new growth. This approach limits upside revenue potential in an expansion but stabilizes revenues in a declining AV environment.

SOUND FINANCIAL POSITION
The county's financial position is strong, exhibited by solid general fund reserves, structural balance, and satisfactory liquidity levels. Fiscal 2013 general fund operations produced an \$8.5 million surplus, raising the unrestricted fund balance to \$49.3 million (18.1% of expenditures and transfers out).

Fiscal 2014 general fund operations were budgeted to produce a \$10 million deficit; however, the county historically has budgeted quite conservatively. Management now estimates actual operations produced a modest surplus despite ongoing pay-as-you-go spending on one-time capital projects.

The county's fiscal 2015 budget includes a fund balance appropriation of \$8.3 million and about \$40 million to fund deferred maintenance. Management expects to outperform its budget, as is typical, and to realize a slight operating surplus.

The county's largest source of revenues is property taxes, which, as mentioned above, are automatically levied at the same level every year, plus new growth, assuming the county adopts its certified tax rate, as is typical. Because this revenue source is not indexed to inflation, the county's structural balance may turn to a deficit position if expenditures grow at a higher rate than total revenues. As a result, the county's long-term financial position likely will depend on the continued willingness of public officials to raise the tax levy from time to time and/or make expenditure cuts to offset inflationary pressures. The county's 'AAA' GO rating reflects Fitch's expectation that the county will continue to raise its property tax levy, as needed, to maintain a solid financial position.

STRONG DEBT PROFILE
The county's total debt burden is low at \$1,402 per capita and 1.4% of market value. These strong debt metrics stem in part from the county's significant use of pay-as-you-go capital financing. The county's principal amortizes rapidly, with 39% and 69% of debt retiring in five and 10 years, respectively. In addition to GO bonds the county's Fitch-rated debt includes approximately \$106 million sales tax revenue bonds rated at 'AA+.'

The county participates in the state's well-funded Utah Retirement System (URS). In recent years the state implemented material pension reforms that should slow pension cost growth moving forward. Recessionary investment losses lowered the public employees' non-contributory system's (the largest of the county's systems) funded ratio to somewhat weak levels in recent years, but investment returns in fiscal 2013 raised funded levels to 85.3%. Fitch assumes a standardized 7% investment return rate (the system assumes a more generous 7.5%), which lowers the funded ratio to a still well-funded level of approximately 80.9%. The system uses a five-year smoothing period, so prior years' investment losses have been incorporated into fiscal 2014 contribution rates and management does not anticipate rate increases from current levels.

The county's unfunded OPEB liability equals \$99.3 million based on the most recent actuarial report, or a modest 0.1% of AV. The county has historically funded OPEB on a pay-as-you-go basis. In fiscal 2013 the county discontinued OPEB benefits for new employees and has recently established an irrevocable trust to address remaining unfunded liabilities.

The county's carrying costs (debt service, pension ARC, and OPEB costs over total governmental expenditures) equal a low 13%. Carrying costs are likely to remain at low levels due to recent years' pension and OPEB reforms, rapid direct debt amortization, and relatively modest borrowing plans.

PRUDENT MANAGEMENT PRACTICES
Fitch views favorably the county's prudent financial management policies and recent years' actions to offset recessionary pressures. Management proactively cut expenditures early in the recession and, although delayed until 2013, increased property tax rates. Financial management policies include a minimum 10% undesignated general fund balance that has regularly been exceeded. Long-term debt is reviewed by a senior committee, and by policy the county uses pay-as-you-go capital financing as its first alternative. State and county reforms to employee benefits should slow related benefit expenditure growth considerably moving forward.