OREANDA-NEWS. August 11, 2015. Fitch Ratings has assigned an 'AAA' rating to the following revenue bonds to be issued by the Monmouth County Improvement Authority (the MCIA):

--\\$22,820,000 lease revenue refunding bonds series 2015 (Monmouth County Guaranteed) (Brookdale Community College Project).

The bonds will be sold via negotiation the week of August 10. Proceeds will refund a portion of the authority's outstanding lease revenue bonds, series 2008 (Monmouth County Guaranteed) (Brookdale Community College Project). Net present value savings \\$2.3 million or 10.1% of refunded par are estimated.

Fitch currently rates \\$397..5 million of outstanding GO bonds issued by Monmouth County (the county) and \\$367.1 million outstanding MCIA revenue bonds 'AAA'.

The Rating Outlook is Stable.

SECURITY
The revenue bonds are payable by rental payments made by the Brookdale Community College (the college), and are additionally backed by the full, unconditional and irrevocable guarantee of the county and its unlimited ad valorem taxing power pursuant to a guaranty resolution entered into by the county and the MCIA.

KEY RATING DRIVERS
STABLE FINANCIAL POSITION: General fund (or current fund) reserve levels remain solid and liquidity is strong. Conservative budgeting and financial management have allowed for relatively stable financial results over an extended period. Operations are largely funded from property taxes, which are fully guaranteed by underlying municipalities.

FAVORABLE ECONOMIC PROFILE: Monmouth County's economic profile is driven by its favorable location within the greater New York metropolitan area and its expansive beachfront. High income levels, low poverty, and a comparatively stable population and housing market are strengths for the county, somewhat tempered by its exposure to seasonal leisure activity.

MANAGEABLE LONG-TERM LIABILITIES: County debt levels are moderate and rapidly amortized. The scope and nature of future capital needs and borrowing plans are manageable. Carrying costs including debt service, pension and other-post employment benefits (OPEB) remain an affordable component of the budget.

RATING SENSITIVITIES
SHIFT IN FINANCIAL PERFORMANCE: The rating remains sensitive to the maintenance of stable financial operations and a healthy fund balance position. An increase in the 2015 tax levy and resolution authorizing the sale of the county's care centers, which have consistently run at sizable deficits, are expected to help stem the growing use of current fund reserves for operations.

CREDIT PROFILE
Monmouth County is located along the northern Atlantic shore of New Jersey, 50 miles outside of New York City. The county's 2014 estimated population is about 630,000. Incorporated cities located within Monmouth County include Asbury Park, Long Branch, and Red Bank.

PROXIMITY TO NEW YORK CITY CREATES STRONG ECONOMIC CORE
Fitch expects the county's economy will continue to perform well over time given the benefits inherent in its proximity to New York City and desirable coastline location. Monmouth County resident employment gained some momentum in 2014 increasing 2.7% on the year following several years of flat performance consistent with the broader New York-Newark-Jersey City metropolitan statistical area (MSA). The county's preliminary June unemployment rate was 4.9% compared to 5.6% for New Jersey. Leading non-governmental employers in the county include Meridian Health Care (9,932), Centra State Healthcare Systems (2,626), Saker ShopRites (2,250), and Comm Vault (1,740).

The county's labor force is well educated and median household income registers a strong 118% of the state and 159% of the U.S. standard. The county's market value on a per capita basis, approximately \\$175,000, is considered very high and is further indicative of the wealth characteristics of both year-round residents and second home owners. Home prices in several of the county's larger communities such as Red Bank, Middletown, and Howell range from \\$300,000 to \\$380,000 according to Zillow Group, but prices have been fairly flat. Tax base development may be a key issue going forward given the somewhat mature nature of the county and limitations on developable land.

SOUND FINANCIAL RESOURCES MAINTAINED
Audited financial statements for 2014 depict a decrease in the current fund balance of \\$9.8 million on the year (1.9% of spending) and a total fund balance of \\$66.4 million or 12.6% of spending. The fund balance usage was less than anticipated but significant nonetheless. The county's financial management policy requires a minimum current fund balance equal to 7% of revenues. Reserve levels have historically been maintained well above the policy level, which is an important consideration in the maintenance of the 'AAA' rating.

FINANCIAL OUTLOOK IMPROVED FOLLOWING TAX INCREASE, PLAN TO SELL CARE CENTERS
Management has done a noteworthy job controlling costs to counter flat revenue totals but flexibility has diminished over time, largely reflected in lower appropriation reserves (unspent, lapsed appropriations) and sizable use of fund balance in 2014. The adopted 2015 budget includes a \\$40 million appropriation of fund balance representing a high 8.2% of budgeted revenue. The county has lowered its fund balance appropriation from \\$46 million in 2013 and \\$43 million in 2014. Management plans to continue to reduce the amount of fund balance appropriation to a level it feels can be completely regenerated or replenished from operations. Management forecasts a \\$6.3 million decline in fund balance from operations in 2015.

Importantly the county approved a 1.5% increase in its tax levy, the first increase since 2010, which will generate \\$4.5 million in new recurring revenue for the current fund. The county retains good flexibility under the statutory tax cap - its 2015 levy of \\$307 million was \\$7.2 million under the maximum allowable amount to be raised by taxation. The county's property tax rate remains among the lowest in the state, and the tax levy is fully guaranteed by the county's underlying municipalities eliminating risk of non-collection or delinquency. Property taxes account for 63% of the 2015 budget.

In March the county authorized the sale of its two care centers. The care centers have operated at a deficit for some time, with the current fund absorbing losses totaling \\$7.1 million in 2014, \\$6.9 million in 2013, and \\$6.9 million in 2012 - as such, the disposition of these facilities, although politically challenging, would appear to relieve a considerable financial burden on the current fund budget. The county has retained a real estate brokerage firm with experience assisting other NJ counties that have sold nursing home facilities in recent years. The county reports good interest in the properties; management expects to bolster the current fund reserve position with the proceeds from a sale.

MANABEABLE DEBT LEVELS AND CAPITAL DEMANDS
Fitch estimates the county's overall debt burden (inclusive of outstanding debt of overlapping governments) at a moderate \\$2,941 per capita or 1.6% of market value (estimated at \\$112.8 billion in 2015). Debt statistics include \\$367.1 million of county-guaranteed debt issued by the MCIA and backed by the unlimited tax GO pledge of the local unit participants; this amount represents about 18% of the county's overall debt burden (. In the history of the MCIA debt program there has never been an occurrence of a local unit bond payment default.

The rate of outstanding principal amortization exceeds the county's aggressive policy of 70% within 10 years, providing ample capacity in future years for continued capital investment. Despite the rapid payout, carrying costs related to county debt remain quite manageable at about 11% of spending. Capital spending increases with the multi-year plan adopted in 2015 but remains very manageable at \\$307 million or 0.3% of market value and will not increase debt levels over the five year period. Capital needs center on bridge and road improvements, open space purchases, and engineering facilities.

RETIREE LIABILITIES REMAIN AFFORDABLE
Monmouth County participates in two state-run pension plans, Public Employees Retirement System (PERS) and Police and Fireman's Retirement System (PFRS), and is fully funding its actuarially based contribution established by the state. PERS and PFRS reported 2014 funded ratios were 74% and 76%, respectively. Fitch estimates the funded status of both plans diminishes moderately when substituting a 7% rate of return for the plans' fairly aggressive 7.9% rate.

Pension contributions remain affordable and have been fairly stable, benefiting from recent reforms enacted by the state including an increase in employee contributions. Payments to the state plans are budgeted at \\$23.8 million in 2015 or 4.9% of spending. The county budgets just \\$100,000 for its single-employer defined contribution plan. The liability for other post-employment benefits (OPEB) was reported at \\$436 million in 2013, or 0.4% of market value. OPEB is funded on a pay-as-you-go basis and payments are expected to decline over time, since employees hired after July 1, 1994 will not receive paid health care benefits when they retire.

COUNTY GUARANTY PROVISIONS
The obligation of the college to pay rentals to the MCIA is a direct and general obligation of the college. The bonds are additionally secured by the full, unconditional and irrevocable guarantee of Monmouth County, backed by its unlimited ad valorem taxing power. If on the 15th day of the month preceding a month in which MCIA debt service is payable there are insufficient funds in the debt service fund to make such payment the MCIA shall notify the county and the county shall immediately take all actions necessary to cure the deficiency (which may include the adoption of an emergency appropriation). Fitch estimates annual debt charges associated with all outstanding county-guaranteed MCIA debt at roughly \\$22 million or 4.5% of the current fund budget. There is no history of local unit payment default.