OREANDA-NEWS. Fitch Ratings has affirmed the 'AA-' rating for the following St. Clair County, MI bonds:

--$750 thousand limited tax general obligation (LTGO) bonds, series 2007.

The Rating Outlook is Stable.

SECURITY

The LTGO bonds are secured by the county's full faith and credit and its ad valorem tax pledge, subject to applicable statutory and constitutional limitations.

KEY RATING DRIVERS

RECOVERING ECONOMY; STABILIZING ASSESSED VALUE: Wealth metrics are on par with the state and unemployment rates have improved, but still lag behind regional and national averages. Assessed value trends are stabilizing.

STABLE FINANCES; SOLID RESERVE LEVELS: The county has reported stable finances which are supported by sufficient reserves. General fund reserves are bolstered by ample reserves in the delinquent tax revolving fund, offering the county additional financial flexibility.

MANAGEABLE LONG-TERM LIABILITIES: Debt levels are moderate, with no plans for new borrowing. Combined debt service, pension, and other post-employment benefit (OPEB) costs are low.

RATING SENSITIVITIES

SUSTAINED WEAKENING OF TAX BASE: Weakening of the economy, as evidenced by resumed taxable assessed value declines or unfavorable employment trends could have a negative impact on the rating.

REDUCTION IN FINANCIAL FLEXIBILITY: Solid reserves in the general and other funds are credit positives. Significant Deterioration in these reserves could cause negative pressure on the ratings.

CREDIT PROFILE

St. Clair County is located 60 miles north of Detroit and has a population of 160,664, down 3% since the 2000 Census.

IMPROVING BUT VULNERABLE REGIONAL ECONOMY

The county's proximity to Detroit means it shares the region's vulnerability to manufacturing, particularly in the automotive industry. However, recent trends in this economically sensitive industry have been favorable. A number of automotive parts suppliers in the county are expanding as automotive sales increase. Additional suppliers moving to the area could help spur job growth and further the county's economic development efforts.

The May 2015 seasonally unadjusted unemployment rate of 7.3% has declined from the 9.7% recorded a year prior, but remains significantly higher than the state's rate of 5.7% and the U.S. rate of 5.6%. Some of this improvement is due to declines in the labor force, but substantial investment taking place may add more jobs in the near term. Per capita money income is somewhat below average, at 93.4% of the state and 81.6% of the U.S.

STABILIZING TAXBASE

Taxable assessed value (TAV) is exhibiting signs of improvement, reversing trends of decline over the past five years. TAV increased a modest 0.2% in fiscal 2014 and is anticipated by the county to increase an additional 3% in 2015. Concentration of the tax base is a concern, with the top 10 taxpayers accounting for 16.48% and the largest taxpayer, Detroit Edison, representing a high 13.35% of TAV.

PRUDENT FINANCIAL PERFORMANCE

The general fund has had small operating deficits in fiscal year 2013 and fiscal year 2014, departing from surpluses in the prior five years. Fitch expects the county to find additional cost savings to offset these changes and return to positive balances in fiscal 2015.

General fund unrestricted balance was $6.3 million or 11.3% of expenditures in fiscal 2014. In addition, the county may transfer the unrestricted balance available in the county's delinquent tax revolving fund. In 2014, $29.1 million was available in the fund, representing another 60% of general fund spending that further increases financial flexibility.

Fiscal 2014 revenue declined 2.5%, driven by decreased service charge revenues. Expenditures were reduced 3.3% from the prior year, resulting from benefit reductions and other operational savings. Despite cost-cutting measure the year ended with a small operating deficit.

Revenue-raising flexibility is limited, as all millages are at the Headlee limit. Favorably, voters approved overrides of the rolled-back rates for two of the county's five millages as well as authorizing a new millage for veteran's services in 2010, signaling voter support.

Fiscal year 2015 performance is projected to continue the stable financial trends. Revenues are expected to increase by 5.2%, driven by gains in property tax revenues. Expenditures are budgeted at comparable levels to the prior year, including a 2% salary increase.

FAVORABLE DEBT PROFILE

The county's debt burden is moderate at 3.7% of full value, or $2,774 per capita. Amortization is above average with 62.5% of debt maturing in 10 years.

The St. Clair County Retirement System, a single-employer defined benefit plan, provides retirement and pension benefits for employees. The county consistently funds the actuarially required contribution. The plan was funded at 86% in 2013 or an estimated 81.7% when adjusted by Fitch to reflect a 7% discount rate.

The county budgets 23.5% of payroll toward pension and OPEB expenses, with any excess of the pension ARC diverted to the OPEB trust. This has resulted in declines in the OPEB unfunded actuarial accrued liability. Carrying costs are low, with debt service, pension ARC and OPEB actual expenses representing 12.15% of total governmental fund spending.