OREANDA-NEWS. Fitch Ratings has assigned an 'AA+' rating to the following Stafford County, VA (the county) bonds:

--$12 million general obligation (GO) public improvement bonds, series 2015.

The bonds are expected to be sold competitively on July 27. Proceeds will be used to fund transportation improvements and parks and recreation facilities.

In addition, Fitch has affirmed the following ratings:

--$22.9 million general obligation (GO) public improvement bonds series 2013 at 'AA+';
--$28.9 million Economic Development Authority (EDA) lease revenue bonds series 2008 at 'AA'.

The Rating Outlook has been revised to Positive from 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

ECONOMIC VIBRANCY SUPPORTS POSITIVE OUTLOOK: The Positive Outlook reflects the continued low unemployment, growing economic diversification and essentiality of the Quantico Marine Base to U.S. national security.

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

HISTORY OF STRONG DEMOGRAPHIC INDICATORS: Median household income is very strong and the poverty rate is low. Population growth has been strong; and growing in-county employment, proximity to major employment centers, and a skilled labor force contribute to sustained, historically low unemployment rates.

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

CONTINUED ECONOMIC EXPANSION: Sustained economic strength, together with continued strong financial health and debt metrics would support a rating upgrade.

CREDIT PROFILE

Stafford County is located 25 miles south of Washington D.C. and 50 miles north of Richmond, and it benefits from accessibility to several interstate highways and rail lines. Population increases during the past decade outpaced the commonwealth by about three times, and the 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.

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.

In fiscal 2014 the general fund concluded with a $4.5 million operating surplus (1.8% of spending) and a $57.9 million unrestricted fund balance (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.

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 slight increase in its unassigned general fund balance. The total fund balance is expected to end fiscal 2015 at $58 million or higher, a minimal decline due to planned spending of reserves 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

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 federal security and military employment, has expanded further into the education services, health care and technology sector.

A portion of the Quantico Marine Corps Base falls within the county. A diverse, multi-agency, federal installation with projected continued growth, the base recently received $500 million in federal investment and a number of highly essential federal national security installations have been consolidated to the base. During the last realignment five investigative agencies were relocated to the base.

Among the base's long standing non-marine tenants are Drug Enforcement Agency's (DEA) and the FBI's principal training facilities as well as the FBI's national crime lab. The federal government represents a high 10.6% of the county's employment.

Other large employers include a sizable Geico regional headquarters and national print facility, Stafford Hospital (opened in 2009 and designed for expansion), afood processing facility (Greencore) and a food transport concern (McLane MidAtlantic). Ongoing transportation improvements including new high occupancy lanes on I95, new /improved interchanges on I95, a planned third rail on Virginia Railway Express and a new regional airport terminal are serving to open the county to development.

EXCEPTIONALLY HIGH INCOME LEVELS

Other economic indicators for the county are also positive. The county's median household income places the county in the top 2% of all counties in the nation. The poverty rate is very low at 5.1%. Residents are highly educated with 36% holding a bachelor's degree.

Throughout the economic downturn the county unemployment rate topped out at a low 6%. The unemployment rate as of March 2015 was 5%, below the nation and on par with the state. Employment growth in the county has outpaced the growth of the labor force; and the county's employment growth rate was the highest among the state's localities from 2009 to 2014.

MODERATE DEBT PROFILE

The overall debt burden is moderate, with debt at $2,816 per capita and 2.7% of market value. The county's fiscal 2016 to 2025 ten year capital improvement plan (CIP) totals a manageable $566 million and will be funded by a mix of tax-supported bonds ($327 million), pay-go, and other sources. The largest spending areas are for schools and transportation at 47% and 25%, respectively. Fitch does not expect the county's capital projects to pressure the credit, given the county's growing resources, relatively modest debt burden, and slightly above-average amortization of approximately 57% in 10 years.

LOW OTHER LONG-TERM LIABILITIES

Pension and other post-employment benefit (OPEB) liabilities are modest relative to the county's resources. 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 83%. The June 30, 2014 unfunded actuarial accrued liability of $26.9 million represents a very low .1% of the county's taxable assessed value.

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 a low 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.