OREANDA-NEWS. Fitch Ratings has affirmed the following Whitney Intercounty Drain Drainage District (the district) Michigan rating:

--\\$0.81 million drain bonds series 2007 at 'A-'.

The Rating Outlook is Stable.

SECURITY

The bonds are primarily secured by special assessments levied on property and public entities within the district. While the district has no general taxing power, drainage commissioners of the three underlying counties (Iosco, Arenac, and Ogemaw) are authorized to levy a special assessment sufficient to pay their share of debt service.

The bonds are also secured by the general obligation of each county to levy ad valorem taxes on all taxable property in the county subject to applicable constitutional and statutory tax rate limitations in proportion to each county's special assessment. The agreement is several, where there is no make-up provision if one of the counties does not pay its allocated portion.

KEY RATING DRIVERS

WEAKEST LINK ANALYSIS; LIMITED TAX: The rating approach is a weakest link analysis given the several nature of each county's obligation. Fitch views the counties' fundamental credit characteristics on par, factoring in the limited tax pledge, each reflected in the 'A-' rating on the bonds.

HIGH RESERVES ARE KEY: Maintenance of high reserves by each county is a key offset to lack of revenue control, given statewide limitations. Each county voluntarily maintains a delinquent tax revolving fund which significantly boosts financial flexibility. Combined reserves for each county range from 53% to 91% even after planned draws.

NARROW ECONOMIC BASE: Agriculture, natural resources and tourism underpin the district's resource base. Year-round population and employment trends are stable to declining across the three counties, with surges in the summer months. Socio-economic indicators consistently compare unfavorably to the national levels.

LIABILTY PROFILE A STRENGTH: The counties are expected to maintain low liability burdens. Ogemaw and Arenac counties consistently fund the actuarial required pension contributions. Iosco's consistent underfunding is mitigated by the small size of the unfunded liability (0.5% of TAV) and its high combined cushion (91% of spending).

RATING SENSITIVITIES

REDUCED RESERVES: A sizeable shift in reserves, absent offsetting improvement in credit fundamentals, would likely result in a rating downgrade.

CREDIT PROFILE

The district is located in the northeast portion of Michigan's Lower Peninsula, approximately 190 miles northwest of downtown Detroit. Member counties include Iosco County (population 25,420), Arenac County (population 15,353), and Ogemaw County (population 21,039).

PROPORTIONATE CONTRIBUTION TOWARD SECURITY

The primary bond security consists of special assessments levied on the benefited property within the district; should the assessments prove insufficient, Iosco, Arenac, and Ogemaw counties have pledged their full faith and credit and limited tax obligation to pay their allocated portion of the debt service. Each county's obligation is several, so there is no make-up provision if one of the counties does not pay its allocated portion.

Collected special assessments have equaled one hundred percent of debt service. The counties have traditionally imposed assessments that have provided slightly more than one times debt service coverage. Each county levies special assessments on the property tax bill and transfers their debt service portion to Iosco County to administer payment. Iosco County is obligated to repay nearly 75% of the debt service, Arenac County almost 23%, and Ogemaw County 2%.

LIMITED EMPLOYMENT BASE CONTRIBUTES TO BELOW-AVERAGE WEALTH

The district's large areas of forest land and abundant lakes and rivers contribute to its attractiveness as a tourist destination, especially during the summer when the population in some areas of the counties doubles. While rural, the district's economy has some diversity among the agriculture, industrial, and service sectors. Major employers of the counties within the district include a casino, two health care facilities, an aircraft maintenance company and the school districts.

Assessed valuations have begun to stabilize with marginal AV increases in Iosco County and Ogemaw after recent annual declines. Arenac County continues to recover with a 1.5% year-over-year TAV increase. None of the counties has a concentrated tax base.

Area unemployment rates are chronically above average. In June 2015, Iosco and Arenac counties recorded unemployment rates of 7.1% and 8.1%, respectively, notably higher than 5.8% for the state and 5.5% for the nation. Socioeconomic indicators are weak, with per capita income levels tracking at roughly 75% of the national average.

HIGH RESERVES OFFSET POTENTIAL REVENUE PRESSURES

Michigan local governments maintain little revenue control given the reliance on property taxes and statewide tax raising limitations. Long-term risks associated with the three counties' lack of control and stable to declining bases are counterbalanced by very high combined general fund, building fund and delinquent tax fund balances. Estimated fiscal 2015 combined balances compared to spending totaled a high 91%, 53% and 60% respectively for Iosco, Arenac and Ogemaw counties.

LITTLE PRESSURE FROM LONG-TERM LIABILITIES

Overall debt burdens for each of the counties are modest with the vast majority of the total debt burden attributable to overlapping school district debt. Currently Iosco and Arenac counties do not plan to issue additional debt and have minimal capital needs for at least the next five years. The amortization rate for these counties is rapid, although it is sluggish for Ogemaw county.

Pension expenses are moderate. Employees hired prior to certain dates participate in the Michigan Employees Retirement System, a state-wide, multiple-employer defined benefit pension plan. The counties have annually made all required pension payments to the state, with the exception of Iosco County. Newer employees participate in a defined contribution plan.

Iosco and Arenac counties do not provide other post employment benefits (OPEBs). Ogemaw county pays its OPEB obligation on a paygo basis and has an OPEB liability of less than 0.5% of market value. Total carrying costs do not pressure any of the credits.