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

--$10,580,000 GO refunding bonds, series 2016A;
--$2,475,000 GO refunding bonds, series 2016B.

The bonds are scheduled for competitive sale on March 22. Proceeds will be used to refund portions of series 2007, series 2008C, series 2011A, and series 2013D GO bonds for debt service savings.

In addition, Fitch affirms the following ratings:

--Approximately $82.3 million of outstanding GO bonds at 'AAA'; --Approximately $3.7 million of outstanding refunding certificates of participation (COPs) University Center Public Facilities Corp. (SC) (university center project) at 'AA+'; --Approximately $39.6 million of outstanding COPs (hospitality tax) at 'AA-'.

The Rating Outlook is Stable.

SECURITY

The GO bonds are supported by the full faith and credit and unlimited taxing power of the county. The series 2016B bonds are initially payable from unlimited ad-valorem taxes levied separately upon taxable property in two small fire service areas within the county.

The university center COPs are payable from lease rental payments by the county, subject to annual appropriation. Rental payments are payable from any legally available source of the county. Bondholders are additionally secured by a surety-funded debt service reserve fund (DSRF) equal to 50% of maximum annual debt service (MADS), and a leasehold interest in facilities providing educational and laboratory space for Greenville Technical College and other regional institutions of higher learning.

The hospitality tax COPs are payable from lease rental payments by the county, payable from the proceeds of a 2% hospitality tax and, if these are not sufficient, the county's share of state accommodations taxes net of prior allocations. The hospitality tax is not subject to appropriation although the accommodations tax must be appropriated to pay debt service. A DSRF and a leasehold interest in certain tourism-related properties provide additional security.

KEY RATING DRIVERS

STRONG FISCAL OVERSIGHT: Greenville County's 'AAA' GO rating is supported by its exceptional financial management, consistent surplus operating results, sizable reserve levels and ample balance sheet liquidity.

DIVERSE AND BROAD ECONOMIC BASE: The county serves as an economic anchor for its region. Diversifying from its former textile manufacturing base, the local economy contains a broad mix of business services, healthcare, government, tourism and educational activities.

MODEST DEBT LOAD: Direct and overlapping debt levels are moderate while direct debt is rapidly amortized. Capital needs are very manageable and additional debt plans are not expected to alter the county's overall debt structure.

APPROPRIATION RISK: The university center project COPs ratings reflect the risk of annual appropriation. The one notch difference between the GO and COPs ratings reflect the leasehold interests in essential facilities for the county.

LOWER RATING ON HOSPITALITY TAX COPs: The three-notch difference between the GO and hospitality tax COPs incorporates the narrow and potentially volatile repayment source for the COPs.

RATING SENSITIVITIES

WEAKENING OF RESERVE BALANCES: Poor financial performance leading to substantial drawdown of reserves could threaten the GO and university center project COPs ratings.

REDUCED HOSPITALITY TAX COVERAGE: Large declines in hospitality tax revenues resulting in significant reductions in debt service coverage could lead to negative rating action for the hospitality tax COPs. The rating is also capped by the county's GO rating.

CREDIT PROFILE

The county encompasses 792 square miles in the northwestern Piedmont section of South Carolina along the North Carolina border. The city of Greenville (GOs rated 'AAA' with Stable Outlook) is the county seat and sixth largest city in the state. The county has experienced robust population growth over the past two decades, increasing by over 40% between 1990 and 2010 to over 450,000. The U.S. Bureau of the Census estimates the county's 2015 population at 481,300. Recent population growth remains brisk at an estimated 7% between 2010 and 2014.

ECONOMIC ANCHOR FOR THE REGION

The county benefits from its location along Interstate 85 between Charlotte, North Carolina and Atlanta, Georgia and is the economic center for a nine county region. The region's economy has diversified from its former manufacturing base to one with a broad mix of services and products. Leading sectors of economic activity include professional and business services, trade, healthcare, education, government and tourism. The two top employers are the county school district and Greenville Health System (revenue bonds rated 'AA-' with Stable Outlook), one of the largest health systems in the state, with combined employment of about 21,000.

JOB GROWTH REVIVES

County job growth picked up in 2015 with employment up 2.9% for the year after a slight dip in employment growth during 2014. December 2015 year over year employment growth was a robust 4.1% indicative of strong economic momentum. The county's December unemployment rate of 4.3% is well below the state (5.5%) and national (5.0%) averages.

Capital investment activity continues to be significant as indicated by rising building permit valuations, both in the commercial and residential sectors. In addition, the inland port operated by the South Carolina Ports Authority on 100 acres within the county provides direct access to the Port of Charleston. The presence of the inland port and extensive expansion of the Port of Charleston are expected to foster additional development within the county.

County wealth indices exceed state benchmarks but fall short of the national averages. Per capita income for 2014 accounts for 111% of state norms but only 95% of the national average.

MANUFACTURING STILL AN IMPORTANT ECONOMIC DRIVER

Manufacturing remains an important component of the local economy, accounting for approximately 15% of Greenville-Anderson-Mauldin metropolitan statistical area (Greenville MSA) labor force. Over 580 manufacturing facilities are located within the county. Manufactured products include industrial robots, electronic components, automotive products, gas turbines and pharmaceuticals.

Major manufacturers include auto manufacturer BMW, located in nearby Spartanburg, Michelin North America, and General Electric, which operates the largest gas turbine manufacturing plant in the world. Recently, Magna International, an automotive supplier, announced a $50 million expansion of its manufacturing facilities within the county. Following an 11% decline in employment between 2008 and 2010, manufacturing jobs in the Greenville MSA have increased steadily since and now approach pre-recession levels.

CONSISTENT TAXABLE VALUE GROWTH

Assessed values have proven resilient, increasing every year since at least fiscal 2003. Tax base growth slowed in fiscal 2012 to less than 1% but has since expanded at an increased rate with values up 1.4%, 2.6% and 3.6% in fiscals 2013, 2014 and 2015, respectively. Fitch believes that the tax base will continue to grow over the near term given the 6.9% gain in housing values over last year, according to the Zillow Group. The tax base is diverse, as the top 10 taxpayers represent a modest 4.2% of total assessments.

EXCELLENT FINANCIAL MANAGEMENT

The county's finances are excellently managed, characterized by very strong reserves, prudent budgeting and wide levels of liquidity. The county reported a net surplus of $433,000 for fiscal 2015 general fund operations; the 11th consecutive general fund surplus. General fund balance of $57.3 million represented 40% of expenditures and transfers out. Approximately $40 million or 37.6% of fund balance is unrestricted. Unassigned reserves are in excess of the county's prudent unassigned fund balance target of 25% to 35% of revenues.

Property taxes are the largest revenue source providing about 60% of general fund revenues. Fiscal 2015 property tax revenues increased by 3.1% while overall revenues gained 3.6%. Spending grew by 3.9 % with public safety spending, which represents 59% of general fund expenditures, expanding by 3.5% in fiscal 2014 as a result of additional hires and a 3% salary increase. Management historically has exercised strict cost control, although since fiscal 2011, spending increases have modestly outpaced revenue growth.

The county budgets conservatively with actual results generally outperforming budget. Management's policy is to build in a contingency equal to 2% of estimated revenues for emergencies. The fiscal 2016 general fund budget proposes a $4.2 million use of fund balance. Revenues are budgeted to increase by $6.6 million or 4.8% over fiscal 2015 actual revenues. Most of the revenue growth is attributable to a $5 million increase in property tax revenues as a result of tax base expansion. Expenditures are slated to rise by $8.4 million or 5.9% due to added public safety and law enforcement personnel and salary adjustments for merit increases. The general fund budget also includes a $2.1 million transfer out for capital projects. Even if the budgeted drawdown is realized, unrestricted reserves would still constitute a hefty 34% of general fund spending.

HIGH LEVELS OF LIQUIDITY

The county has ample liquidity with fiscal 2015 unrestricted general fund cash equaling over four months of spending. The sizable cash balance covers primary operations until the major portion of property taxes are received in January and February. County projections for general fund operations call for minor drawdowns in fiscals 2016 and 2017 followed by gradually expanding surpluses in fiscals 2018 and 2019.

MANAGEABLE DEBT LOAD

Total debt burden is moderate at 3% of market value. Direct debt levels are relatively low but substantial overlapping debt of the Greenville County School District raises overall debt levels. Direct debt is rapidly amortized with approximately 80% of principal retired within 10 years and substantial issuing margin remains under the legal debt limit. The county's five year capital improvement program is manageable with $121 million of identified non-enterprise capital needs.

The capital plan includes a new county headquarters with an estimated cost of $50 million to $60 million--officials are currently assessing a potential site. Once a final site is determined, the county will decide upon a financing strategy.

RETIREMENT COSTS DO NOT PRESSURE FINANCES

The county provides pension benefits to its employees through the South Carolina Retirement System (SCRS) or the South Carolina Police Officer Retirement System (PORS), both of which are state administered cost-sharing multiple employer retirement systems. Plan participants pay 100% of their share of the annual actuarially required contribution (ARC). SCRS and PORS funding for fiscal year 2015 was reported at 59.9% and 67.5% respectively (or 56.8% and 64% substituting the plans' 7.5% rate of return for 7%). Existing funding levels suggest contribution requirements are likely to rise over time. The county's fiscal profile can accommodate some growth in pension costs, as fiscal 2015 county pension contributions account for an affordable 5.4% of general government spending The county's proportionate share of the plans' net pension liabilities totals $179.7 million or a manageable 0.4% of market value.

Other post-employment benefits (OPEB) including retiree medical care are provided to retirees through one of three county-subsidized medical plans. The county's OPEB costs are funded on a pay-go basis. The OPEB's unfunded actuarial accrued liability (UAAL) of $7.2 million as valued on of July 1, 2014 is very modest, representing less than 0.2% of the county's current market value.

CRITICAL ASSETS UNDER UNIVERSITY CENTER LEASE

The university center project COPs were used to fund facilities for the University Center, a consortium of higher education institutions including Greenville Technical College, Clemson University and the University of South Carolina designed to increase access to educational opportunities to area residents. Property under the master lease is subject to surrender if the county fails to appropriate lease payments for debt service. Leased property includes classroom and laboratory facilities essential for University Center operations.

HOSPITALITY TAX COPS SECURITY STRENGTHENED

The hospitality tax has been collected pursuant to county ordinance since April 1, 2007 at a uniform rate of 2% on the sales of prepared meals and beverages, including alcoholic beverages, beer, and wine in the unincorporated portion of the county. Approximately 70% of the county's total population resides in unincorporated areas. The hospitality tax ordinance terminates on the later of Dec. 12, 2026 or the payment of the last maturing obligation being paid from the hospitality tax.

STRONG COVERAGE WITH NARROW REVENUE PLEDGE

Hospitality taxes have increased steadily through the recession, suffering their only drop-off in collections in fiscal 2010, a relatively minor 0.6% annual loss. Subsequent collections for the five following fiscal years have rebounded with solid gains ranging from 2.8% to 3.9%. While coverage of MADS by fiscal 2015 hospitality tax revenues is relatively strong at 2.0x, the hospitality tax represents a narrow and potentially volatile revenue stream subject to discretionary spending patterns.

Seven month year-to-date collections of the hospitality tax in fiscal 2016 total $5.3 million or 6.6% above same period collections in the prior year. The county's share of accommodations tax revenues, also available to pay debt service, adds only about 5% to 6% to total pledged revenues.

Legal provisions are adequate. A 1.5x MADS additional bonds test provides moderate protection against over-issuance. The series 2010 and 2014 bonds have typically sized DSRFs with the series 2014 bond DSRF requirement fulfilled with a surety. The DSRF for the series 2008 bonds is funded 50% with cash and 50% with a surety up to MADS.