Fitch Rates Onondaga County, New York's $25.6MM 2007A GOs 'AA+'; Outlook Stable

The 'AA+' rating is based on the county's sound financial position, low direct debt burden benefiting from the use of tobacco securitization proceeds to retire outstanding debt, as well as a diversifying economy with below average unemployment rates. The county's solid management practices are reflected in conservative budgeting and adherence to formal fund balance and debt affordability policies. Commitment to conservative fiscal management enabled the county to maintain its strong financial position in the face of escalating pension, social service, and employee benefit costs that have negatively impacted all counties in the state since the beginning of the decade. Although these budgetary pressures contributed to draws on reserves in 2001-2004, the county's efforts to raise the recurring revenue base, coupled with a statewide cap on Medicaid spending by counties and restrained budget growth at the county level, has resulted in a return to structural balance and solid general fund reserves for three straight years.

Onondaga County is a diverse economic center of central New York. Although population levels declined by 2.3% during the 1990s, the trend appears to be moderating, with a minimal 0.3% decline since the beginning of the decade based on 2006 census estimates. The employment base is bolstered by the presence of the higher education sector. The county is home to Syracuse University with a student enrollment of approximately 18,600. Although the area has been negatively impacted by declines in manufacturing employment, including the transfer of Carrier Corporation's manufacturing operation from the area, these declines have been somewhat offset by growth in service sector employment. Employment in the areas of wholesale and retail trade is also anticipated to benefit from the expansion of the existing regional mall into a multipurpose venue DestiNY USA. Unemployment rates have consistently been below state and national levels and registered 3.9% in September 2007. Income levels are slightly below state and national levels. Fitch expects Onondaga County to face challenges related to the national downturn in the housing market and will monitor the county's ability to maintain a level of financial flexibility consistent with the current high rating level.

Following draws on reserves in 2001-2004 and operations marked by a dependence on one-time revenue sources, the county returned to surplus operations in fiscal 2005 and reported a fiscal 2006 general fund surplus of $18.8 million, bringing the unreserved fund balance to 14.6% of expenditures. Restoration of structural balance was largely due to a 1% increase in the countywide sales tax rate in fiscal 2005 as well as conservative budgeting and a Medicaid cap imposed by the state for all counties. Fiscal 2007 estimated results show another positive year with sales tax collections above budget. The fiscal 2008 budget growth is minimal at under 1% over fiscal 2007 and the county does anticipate using $16 million in fund balance for both capital and operating costs, staying within their policy of maintaining fund balance at 10% of revenues. One of the county's union contracts expired in 2005 and is currently in arbitration. The remainder of the union contracts expire in December 2007. The county has included conservative related estimates in the fiscal 2008 budget.

Overall debt ratios are low at $979 per capita and 1.9% of taxable market value. The county's approximately $373 million outstanding GO debt is offset partly by the $72 million of tobacco settlement securitization proceeds used to refinance outstanding county GO debt. Borrowing needs remain manageable given the current financing arrangements for the court-ordered Onondaga Lake cleanup. Lake remediation projects, which are more than halfway complete, are proceeding in a timely manner and while final costs will likely exceed current estimates of $533 million, the project is scheduled for completion on time in 2012. The six-year capital improvement plan for 2007-2012 totals $609 million, about 53% of which will come from county borrowing. Projects related to the Onondaga Lake clean-up account for 51% of the planned spending for which the county will likely issue debt through the New York State Environmental Facilities Corporation.

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