OREANDA-NEWS. Fitch Ratings has assigned a rating of 'AAA' to the following general obligation (GO) bonds of Charleston County, South Carolina (the county):

--\\$18.8 million capital improvement GO bonds, series 2015A;
--\\$2.1 million fire protection services GO bonds, series 2015B;
--\\$60.5 million GO refunding bonds, series 2015C;
--\\$49 million GO transportation sales tax refunding bonds, series 2015D.

The bonds are expected to sell competitively the week of Oct. 19. Proceeds will be used for capital improvement projects for the Trident Technical College and the Awendaw Fire District. The bonds will also be used to refund outstanding GO and sales tax bonds for debt service savings.

In addition, Fitch affirms the following ratings:

--\\$81 million GO refunding bonds at 'AAA';
--\\$148.9 million GO transportation sales tax revenue bonds at 'AAA';
--\\$86.4 million special source revenue bonds, series 2013 at 'AA'.

The Rating Outlook is Stable.

SECURITY

The GO bonds are backed by the county's full faith and credit and unlimited ad valorem taxing ability. The GO transportation sales tax bonds are additionally payable from a first lien on the revenues from a one-half-cent transportation sales tax imposed by the county.

The special source revenue bonds are a limited obligation of the county, payable solely from certain fees-in-lieu of taxes (FILOT) and, if insufficient, the county shall make provision through a budgetary directive to apply other available moneys to satisfy the FILOT deficiency, such obligation being subject to budgetary appropriation.

KEY RATING DRIVERS

SUPERIOR FINANCIAL PERFORMANCE: The 'AAA' GO rating reflects the county's strong financial management and fiscal discipline, evidenced by its ability to generate favorable operating results during a challenging economic environment, and consistent maintenance of reserves in excess of prudent policy minimums.

FAVORABLE DEMOGRAPHIC FACTORS: Stable population growth, above-average wealth characteristics, and the high educational attainment of county residents underscore the demographic strengths of the county.

MODERATE DEBT POSITION: Key debt ratios are moderate as are the costs of funding the county's long-term debt and employee benefit liabilities.

ECONOMY EXPANDING AND DIVERSIFYING: Unemployment remains low, and recent years' job growth has outpaced the state and nation. Area employment remains heavily influenced by the government sector and the military, though continued diversification is evident and viewed favorably.

SPECIAL SOURCE NOTCHING: The 'AA' rating on the special source revenue bonds is notched down from the 'AAA' rating on the county's GO bonds reflecting the limited nature of the pledge to bondholders.

RATING SENSITIVITIES

STRONG FINANCIAL MANAGEMENT: The GO and special source revenue ratings are 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 highly unlikely.

CREDIT PROFILE

Charleston County encompasses an area of 945 square miles in southeastern South Carolina, including 97 miles on the Atlantic coast. The county's 2014 estimated population of 381,015 represents an 8.8% increase from the 2010 Census and ranks Charleston the third most populous county in the state.

WELL-MANAGED FINANCIAL POSITION

The county's financial position has strengthened over the last decade and current reserves are very strong. At the conclusion of fiscal 2014 the general fund unrestricted fund balance was up slightly year-over-year (1.2%) to \\$52.5 million or 27.7% of spending. Fitch views the county's reserve policies as prudent. The policies maintain an unrestricted general fund reserve of two months (12.5%-16.7%) of general fund spending and a rainy day reserve equal to 4% of spending in the general fund. The rainy day reserve is designated for disaster preparedness and other unanticipated emergencies and is maintained within the general fund and environmental management fund (solid waste).

Unaudited financial results for fiscal 2015 show a healthy operating surplus that brings reserves to \\$54 million. The fiscal 2016 general fund budget depicts a \\$4.7 million draw on reserves, largely to fund the \\$7.6 million in pay-as-you-go capital funding. The budget is funded by a diverse stream of revenue including property taxes (41%), sales tax (27%), state shared revenue (11%) and service charges (11%) among others. The budget also includes a 4-mill increase to the property tax, which still leaves the county with a moderate degree of revenue-raising capacity.

State law limits increases in property taxes for operational purposes based on growth in the consumer price index and population. The county may also capture any allowed but not imposed growth from the prior three years (the additional unused millage cap for fiscal 2016 translates to about \\$5 million in untapped revenue).

The county's historically conservative five-year forecast currently depicts modest reductions in reserves through fiscal 2019. However, the budget remains operationally balanced. The county's financial policies state that reserves in excess of its policy requirement may be used for one-time purposes only, such as pay-go capital or one-time employee bonuses.

MODERATE DEBT LEVELS

The county's overall debt ratios are moderate at about \\$2,937 per capita and 1.8% of market value. The current five-year capital plan includes \\$243 million in general capital improvements and \\$439 million in transportation projects largely financed from a dedicated sales tax and existing transportation sales tax bond funds. In addition to the current issuance, the county estimates borrowing \\$95 million between fiscal 2017 and 2019 for the Charleston County Library expansion, which voters approved in November 2014. Issuance of this debt would not have a significant impact on the county's debt metrics.

LIMITED PENSION AND OPEB LIABILITIES

Total county pension costs are manageable at just over 3% of spending. County employees participate in two cost-sharing multiple-employer pension plans provided by the South Carolina Retirement System (SCRS) and the South Carolina Police Officers Retirement System (PORS). Funding levels for the state pension plans are weak at 59.3% for SCRS and 65.6% for PORS based on Fitch's more conservative assumption of a 7% investment return. Despite system-wide full funding of the ARC, Fitch believes the continued rise of the unfunded actuarially accrued liability (UAAL) will mean future contribution increases for the county.

Current carrying charges for debt along with pension and other-post employment benefits (OPEB) are moderate, consuming 17.4% of government spending. Despite rising pension contributions, carrying costs are expected to remain affordable, aided by rapid debt amortization; 68% of the county's debt is retired in 10 years.

CONTINUED ECONOMIC GROWTH AND LOW UNEMPLOYMENT

Charleston County continued to experience job growth in 2014. Total non-farm employment expanded by 2.5% for the year, which was faster than population growth over the same period (2.2%). As of July 2015, the county's low unemployment rate of 5.3% was better than both the state and nation.

The government sector accounts for a high 20% of area employment, about 125% of the national norm. Joint Base Charleston employs 22,000 active-duty military personnel and civilians, representing about 7% of total employment within the MSA. The base is home to the Space and Naval Warfare Systems Center (SPAWAR) supporting critical communications, intelligence, surveillance and reconnaissance operations for the Navy. Risk of federal budget cuts is of some concern, but there have been no announcements to date that suggest a meaningful downsizing of military operations in the area is forthcoming.

The Port of Charleston remains an important economic engine for the region, anchoring international trade and transportation activity. In fiscal 2016, the port is on pace to surpass the record number of cargo containers moved during 2005. The port also anchors the region's tourism in the form of an expanding cruise industry which is projected to bring in a record 95 cruise ships in 2015. The Charleston region attracted 4.9 million visitors in 2014, generating an economic impact of \\$3.3 billion. The tourism sector supports high retail activity that reached \\$14.5 billion in sales in fiscal 2015 (a 1.4% increase from 2014); retail sales averaged 4.3% annual growth since the low in fiscal 2010.

Boeing employs 8,200 in the region and continues to expand their 787 Dreamliner facilities. In 2014 Boeing opened a new Research and Technology Center, which focuses on advanced manufacturing technology, and Propulsion South Carolina for design and assembly. Late 2016 is the expected completion date of a 256,000 square foot paint facility. In 2013 Boeing announced a \\$1 billion expansion expected to create an additional 2,000 jobs over the next eight years.

A fairly sizable health and education sector lend depth and stability to the economy.

FILOT EXPECTED TO COVER DEBT

While the rating on the special source revenue bonds reflects the county's creditworthiness, Fitch expects the FILOT revenue stream to be fairly stable and to cover annual debt service. In 1995 Charleston and Colleton counties designated certain properties as part of a joint county industrial or business park for the purpose of stimulating economic development. There are only 32 property owners in the multi-county park, from which the county collected \\$14.8 million in FILOT payments in fiscal 2015, over \\$2.5 million ahead of projections. Maximum annual debt service (MADS) on the bonds is estimated at \\$7.9 million resulting in 1.87x coverage. Boeing, rated 'A' with a Stable Outlook by Fitch, is scheduled to make \\$5.8 million in FILOT payments in fiscal 2015, over one-third of projected FILOT receipts and growing.

FILOT payments are collected with real property taxes for county, municipal and school purposes under a single tax bill which must be paid in full by the taxpayer. Taxes and FILOT payments are due Jan. 15. Nonpayment results in a foreclosure notice by June 15 and the property becomes subject to a forfeited land sale the first Monday in November. The collection date of Jan. 15 provides the county ample time to anticipate and address a FILOT shortfall through provision in its operating budget which is adopted mid-June each year. MADS is equal to less than 4% of the county's general fund and debt service fund budget in fiscal 2015, which Fitch considers a manageable sum to absorb in the remote and worst case scenario where no FILOT revenues are available to cover debt service on the bonds.