OREANDA-NEWS. Fitch Ratings has assigned an 'AAA' rating to the following Westchester County, NY bonds:

--$110 million limited tax general obligation (LTGO) refunding bonds-2016 series A

The bonds are scheduled to be sold via negotiation the week of March 28, 2016. Proceeds will be used to refund portions of outstanding bonds for budgetary savings in fiscal 2016, 2017 and 2018.

The Rating Outlook is Stable.

SECURITY

The LTGO bonds are payable from a pledge of the county's full faith and credit and unlimited taxing power, subject to a 2011 state statute limiting property tax increases to the lesser of 2% or an inflation factor (the tax cap law). This limit can be overridden annually by a 60% vote of the county board.

KEY RATING DRIVERS

STRONG SOCIOECONOMIC FUNDAMENTALS: The county benefits from a diverse economy with a wealthy tax base and population.

STABLE GENERAL FUND OPERATIONS: The county has maintained stable general fund operations with satisfactory reserves through a demonstrated willingness to reduce expenditures to close budget gaps.

MODEST DEBT LEVELS: Debt levels are affordable and future capital needs appear manageable.

MODERATING PENSION COSTS: The growth in the annual required contribution (ARC) for pensions is moderating after several years of rapid increases. The county has been exercising its option to delay a portion of current payments to level out pension costs. However, the pension plans are well funded and carrying costs are low.

LIMITED LABOR PROGRESS: All of the county's labor contracts are currently expired.

TAX LEVY LIMIT: The LTGO bonds are rated on parity with the implied ULTGO debt since the county may exceed the tax cap in any one year with 60% approval of the governing board.

RATING SENSITIVITIES

CONTINUED FLEXIBILITY: The rating is dependent on maintaining sufficient flexibility to offset potential future uncertainties.

CREDIT PROFILE

WEALTHY NEW YORK SUBURB

Westchester County, located immediately north of New York City, is one of the nation's most affluent counties. Its wealthy tax base benefits from the strong regional economy and resident income levels rank well above state and national averages. The county's December 2015 unemployment rate of 4% compares favorably to state and national averages of 4.7% and 5.2%, respectively.

The county has a diverse tax base that combines wealthy residential areas, several major retail developments, and numerous corporate headquarters, including IBM and Pepsi. The county's largest employers are reportedly stable and recent growth in biotech as well as additions to the county's extensive retail base is diversifying the economic profile. Assessed valuations increased by 9.53% in 2015 and 2016 after declines from 2008 through 2014 reflecting somewhat delayed economic recovery.

STABLE OPERATIONS WITH SATISFACTORY RESERVES

Similar to all New York counties, Westchester is responsible for a portion of Medicaid costs. However, the state's assumption of Medicaid costs that exceed 3% annual growth limits the county's exposure. The phased-in state takeover of all Medicaid growth is providing additional financial benefit. The county has had stable financial operations in recent years including modest surpluses in fiscal 2012 through 2014, maintaining satisfactory unrestricted fund balance at 8.2% of general fund expenditures.

The preliminary unaudited results for fiscal 2015 indicate a minimal use of general fund balance, resulting in an estimated unrestricted fund balance equivalent to 8% of budgeted general fund expenditures. The 2015 adopted budget included a flat tax levy, aggressively budgeted sales tax projections of 5% and a $6.1 million fund balance appropriation. Sales tax revenue collections were approximately $22 million, 5.4% below budget primarily due to low gas and energy prices. The county offset the revenue shortfall through active expenditure management, particularly with vacant positions. In addition, the county implemented a separation incentive that was accepted by 158 employees, reducing headcount. Leading budgeted revenue sources are the property tax, which made up 31.4% of 2015 revenue, and the sales tax at 30.2%.

The $1.8 billion 2016 adopted budget assumes a 3% budget to budget increase and includes a flat property tax levy. Fitch expects management to maintain a policy of not increasing the property tax levy. Budgeted sales tax revenue is again aggressively budgeted at 5.1% over fiscal 2015 actual collections and federal and state aid is expected to decline by 5.3%. The budget is balanced with a $1.7 million general fund balance appropriation and one time revenues including the sale of county assets. The county anticipates expenditure reductions associated with employee salaries and benefits as the county recognizes savings from the separation incentive offered in fiscal 2015 and one time debt service savings from the current refunding.

LIMITED LABOR PROGRESS

The county's largest union is the CSEA, which has 2,888 members (about two-thirds of all county employees) and whose contract expired at the end of 2011. CSEA members currently do not contribute to health care costs, and past layoffs were in response to an assumption of no change in this position.

Agreements with the county's other seven unions are also expired. Two of the contracts expired at the end of 2014, with the other five expiring at the end of 2015. These union members now contribute to health care costs, which should generate some savings for the county. The county is currently in talks to renew all county contracts.

MANAGEABLE DEBT BURDEN

The county's debt levels are manageable in relation to its wealthy tax base; market value per capita is high at $160,000. Overall debt (including that of cities, towns, villages and school districts) totals an above-average $4,318 per capita, but a more modest 2.7% of market value. Debt amortization is rapid with 73.4% of principal retired in 10 years. The county has a thorough, charter-mandated five-year capital planning process.

WELL-FUNDED PENSIONS; LOW CARRYING COSTS

The county contributes to the state's well-funded defined benefit retirement systems. The funding of the state and local employees plan is approximately 84% using a 7% discount rate assumption and the state and local police and fire plan is approximately 85% funded as of March 31, 2014. Payments were consistently increasing until the ARC declined in 2015. The county has taken advantage of the option to amortize a portion of its payment increase since 2012. Each year's deferral must be amortized within 10 years. Fitch expects that the annual pension costs will remain manageable and that the amortization and repayments will serve to stabilize the county's overall pension burden.

The unfunded actuarial accrued liability for other post-employment benefits (OPEB) is $2.1 billion, or 1.4% of market value. OPEB costs are expected to decline with reductions in headcount. Carrying costs for debt service, pension and OPEB are a low 12% of government fund spending and Fitch expects them to remain stable.