OREANDA-NEWS. Fitch Ratings has affirmed the following ratings for Stafford County, VA (the county):

--\$22.9 million general obligation (GO) public improvement bonds, series 2013 at 'AA+'.

In addition, Fitch affirms the following ratings:

--\$28.9 million Economic Development Authority (EDA) lease revenue bonds, series 2008 at 'AA'.

The Rating Outlook is Stable

SECURITY

The GO bonds are payable by the full faith and credit and unlimited taxing power of the county.

The lease revenue bonds are limited obligations of the EDA of Stafford County, payable from payments to be made by the county, subject to appropriation, pursuant to a Master Trust Agreement. The lease revenue bonds are additionally secured by a Deed of Trust granting a lien on certain essential government assets for the benefit of bondholders.

KEY RATING DRIVERS

SOUND FISCAL MANAGEMENT: Stafford County's record of surplus operating performance and strong reserve levels reflect sound financial management and planning.

GROWING ECONOMIC BASE: The county's employment continues to expand within the health care and educational services fields, aided by growth initiatives and positive workforce characteristics. The moderate concentration in government and military sectors is mitigated in part by the longstanding stable presence of these facilities.

HISTORY OF STRONG DEMOGRAPHIC INDICATORS: Median household income is very strong, ranging from 50%-80% above state and national averages. Proximity to major employment centers and a skilled labor force contribute to a low unemployment rate.

MANAGEABLE DEBT PROFILE: Debt levels are moderate, and other long-term obligations and future capital needs are not expected to pressure the credit.

LEASE REVENUE BONDS APPROPRIATION RISK: The 'AA' rating on the lease revenue bonds reflects the county's general creditworthiness, the inherent appropriation risk, and the essentiality of the assets securing the lien.

RATING SENSITIVITIES
STABLE FINANCIAL OPERATIONS: 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
Stafford County is located 25 miles south of Washington D.C. and 50 miles north of Richmond, and it benefits from easy accessibility to several interstate highways. Population growth since 2000 has been strong with an average annual increase of 3.5%. The estimated 2014 population is nearly 140,000.

STRONG FISCAL MANAGEMENT, HEALTHY RESERVE LEVELS
County finances are well-managed, adhering to long-standing policy guidelines, and include detailed planning for capital and operating needs. Fiscal 2014 concluded with a \$4.5 million operating surplus in the general fund, equal to 1.8% of spending, and an unrestricted fund balance totaling \$57.9 million or 22.2% of operating expenditures and transfers out. This marks the county's sixth consecutive operating surplus.

The unassigned portion of the unrestricted general fund balance includes the county's policy reserve equal to 12% of general fund revenues. Use of these reserves requires board approval and must be for onetime, non-recurring expenditures. Replenishment is required within three years.

The county's financial operations have been solid. Over the last few fiscal years, the county has budgeted revenues conservatively and observed consistent growth in overall tax revenues. The county has budgeted conservatively on the expenditure side as well, with actual spending coming in below budgeted expenditures by 3%-8% annually since 2004.

Property tax revenues are 69% of fiscal 2014 revenues. There are no statutory or charter caps or restrictions on tax levy or rate growth, which Fitch notes adds to the county's financial flexibility.

POSITIVE RESULTS EXPECTED TO CONTINUE
Estimated fiscal 2015 results are exceeding adopted budget amounts and management is projecting a seventh consecutive operating surplus. Unrestricted fund balance is expected to end fiscal 2015 at \$53 million or an ample 20% of spending with reserves used for one-time capital projects.

The adopted fiscal 2016 operating budget is a 1.1% increase (\$2.8 million) in spending from fiscal 2015. The budget maintains the current tax rate and does not appropriate fund balance. Fitch expects the county to continue to record favorable operating results and remain in compliance with its fund balance policy given its conservative budgeting practices.

GROWING ECONOMIC BASE ANCHORED BY FEDERAL GOVERNMENT PRESENCE
The county benefits from its proximity to the Washington, D.C. metropolitan region and a well-educated and trained workforce. The county's stable economic base, grounded in government and military employment, has expanded further into the education services, health care and technology sector. Quantico Marine Corps Base, a diverse, multi-agency, federal installation with projected continued growth, recently received \$500 million in federal investment and provides the county with long-term employment stability. In addition to serving as a marine training facility, the FBI's principal training facility and crime lab are located on the base, which extends over three jurisdictions' boundaries including over 30,000 acres in Stafford County. Though long-standing, the employment cluster leaves the county vulnerable to potential changes in the outlook for regional government/military jobs. Fitch expects increased economic diversification as the county attempts to protect against issues related to a concentrated economic base.

Employment growth in the county has outpaced the growth of the labor force and employment growth in the metropolitan statistical area (MSA). Approximately 30% of the county's residents commute outside the county for work. A recent economic study concluded jobs within the county will increase by roughly 5% in the next two years. Fitch believes this is reasonable as the county is supported by continuous private capital investments.

Other economic indicators for the county are also positive. Per capita income levels are 30% higher than those of the nation, and median household income levels are 80% higher. The county has experienced rapid population growth since the 1970s, with increases during the past decade outpacing those of the commonwealth by about three times. Recently, annual population growth averaged a more moderate 2% a year. Unemployment rate (5.0% as of March 2015) remains below the nation and on par with the state.

AFFORDABLE DEBT PROFILE
The overall debt burden is moderate, with debt at \$2,839 per capita and 2.9% of market value. The county's ten year capital improvement plan (CIP) totals a manageable \$595.5 million and will be funded by a mix of tax-supported bonds (\$327 million), pay-go (\$115 million), and other sources. The largest spending areas are for schools and transportation at 25% and 47%, respectively. Near term, the county anticipates borrowing \$12 million in general obligation bonds as well as \$20 million annually through the Virginia Public School Authority's pooled loan program. Fitch does not expect the county's capital projects to pressure the credit, given the current debt burden, a slightly above-average amortization of 57% in 10 years and the size of debt-funded capital needs.

LOW OTHER LONG-TERM LIABILITIES
Pension and other post-employment benefit (OPEB) contributions do not stress financial operations. County employees participate in the state-administered Virginia Retirement System, an agent multi-employer defined benefit pension plan. The county makes annual payments as determined by the state that equal its annual required contribution, representing a modest 1.7% of total governmental spending in fiscal 2014. The county's funded ratio as of fiscal 2014 was estimated at an adequate 79% using a Fitch-adjusted rate of return of 7%.

OPEB is currently funded on a pay-go basis and costs accounted for less than 1% of spending in fiscal 2014. Pension and OPEB costs are expected to remain low. Combined carrying costs for debt service, pension and OPEB totaled 13.3% of governmental spending in fiscal 2014.

LEASE REVENUE BONDS SECURED BY ESSENTIAL ASSETS
Debt service payments for the lease revenue bonds are subject to annual appropriation. The lease revenue bonds are additionally secured by a deed of trust granting a lien on several essential leased assets including a library, courthouse, and communications system. The current value of these assets exceeds total principal outstanding.