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TEXT-Fitch rates Chester County, Pa. GOs 'AAA'
July 25, 2012 / 6:36 PM / 5 years ago

TEXT-Fitch rates Chester County, Pa. GOs 'AAA'

 (The following statement was released by the rating agency)
 July 25 - Fitch Ratings assigns the following ratings to the County of
Chester, PA's (the county) general obligation (GO) bonds:

--$38,165,000 GO bonds, series of 2012, 'AAA'.

The bonds are scheduled to sell via negotiation the week of July 30.

In addition, Fitch affirms the county's following ratings:

--Approximately $171.8 million outstanding GO bonds (series 2009B, 2009C, 2010A
and 2011) at 'AAA'.

The Rating Outlook is Stable.


The bonds are a general obligation of the county backed by its unlimited tax


STRONG FINANCIAL POSITION: The county continues to maintain solid financial
operations and through conservative budgeting practices has retained its
above-average reserve levels.

FISCALLY PRUDENT MANAGEMENT TEAM: Management has established future planning
strategies and fiscal polices to ensure financial flexibility.

ABOVE-AVERAGE SOCIOECONOMIC PROFILE: The county benefits from high wealth and
income levels and a stable and diverse employment base including federal, state
and local government institutions and major corporations.

LARGE AND DIVERSE TAXBASE: Although the county's taxbase experienced slight
declines in value over the last two years, its large size and diversity provides

MANAGEABLBE LONG-TERM LIABILITIES: The county's debt burden is manageable and
characterized by modest future borrowing needs and reasonable pension costs.


The county is located in southeastern Pennsylvania, 30 miles west of
Philadelphia. Population and employment opportunities increased substantially in
the last three decades as suburban development spread westward and as high
technology businesses grew along the Route 202 corridor. The 2010 U.S. Census
recorded the county's population at 498,886, an increase of 15.1% since 2000.
While future growth is expected, Fitch believes it will be at a slower pace.

The economy is well established and diverse among financial services, education,
health services and agriculture sectors. Non-governmental employers are led by
Vanguard Group (9,158 employees), Siemens Medical Solutions (5,130) and QVC,
Inc. (2,722). The county's unemployment rate of 5.7% in May 2012 remains well
below the state and national averages of 7.3% and 7.9%, respectively. Wealth
levels are well above average with 2010 median household income equal to 168%
and 163% of state and national levels, respectively, making it the wealthiest
county in the state.

The county's tax base has an estimated market value of $65 billion, an increase
of 71.6% from 2002. Growth has tapered off due to the slowdown in the economy
with assessed value declining slightly in 2010 and 2011. Management has
indicated that signs of new development continue with a new Walmart store and
two new office buildings. The county enjoys a diverse tax base with little
concentration in any one sector or taxpayer. The top 10 taxpayers represent a
modest 2.5% of total assessed valuation. Total property tax collections are
strong, averaging over 99% for the last five years.

The county's fund balances remain strong due to its conservative budget
practices, expenditure controls, and healthy flow of revenue driven primarily by
property taxes, which comprise 74% of general fund revenues. The county's
overall tax millage has remained flat for four years and expenditures have been
controlled through cost cutting measures that included workforce reductions,
consolidation of departments, and hiring for only essential services. During
fiscal 2011 (year-end Dec. 31), the county realized a $2.6 million general fund
deficit after transfers, decreasing its fund balance to $43.2 million or 30% of
general fund spending from $45.8 million or 33.4% in 2010. Revenues were $1.3
million below budget due primarily to lower court costs and fines and lower
departmental earnings. The county implemented GASB 54 in fiscal 2011, reporting
an unrestricted (sum of committed, assigned and unassigned) general fund balance
of $42.3 million or a strong 29.7% of general fund spending. The county has a
policy to retain reserves equal to 10% of expenditures and has consistently
exceeded this level. Fitch believes the county's fund balance levels provide it
with substantial financial flexibility to offset projected increases in future
healthcare costs, ongoing capital needs, and the uncertainties surrounding state
and federal grant programs over the next few years.

The county's fiscal 2012 budget reflects its conservative budgeting practices
with additional expenditure cuts, the fourth year of no property tax increase,
and slightly lower revenue expectations over fiscal 2011. Management
historically has appropriated a portion of general fund reserves to balance the
budget and the 2012 budget includes appropriation of $8.8 million. Based on
year-to-date results, management estimates that it will only use $4.4 million of
the budgeted $8.8 million as revenues are slightly higher due to increased
grants and positive expenditure variances. Fitch believes projections are
reasonable given the county's historical results and prudent financial planning.

The county's direct debt burden is low at $1,022 per capita and 0.80% of market
value. Debt levels are higher on an overall basis, with overall debt per capita
at $4,499 and 3.5% of market value when adding in the debt of the county's local
governments and school districts. Fitch believes the county's higher overall
debt levels are attributable in part to generally limited amount of available
state monies for funding local school districts. As such, the debt issued by the
local districts provides county students with high-quality education and
facilities desired by district residents. The county's five-year capital
improvement plan includes estimated debt offerings of approximately $30 million
per year, but such plan is redefined annually. Fitch anticipates that the
county's debt levels will remain moderate.

The county operated pension plan is adequately funded at 77% with a manageable
unfunded liability of $83 million as of Dec. 31, 2011, based on a 7.5% rate of
return. Under Fitch's more conservative 7% rate of return, the funded ratio
drops to a still adequate 73%. Beginning in 2011, new employees became part of a
separate tier of the plan with higher employee contribution rates contributing
to an approximate $4 million in savings for fiscal 2011. The county
traditionally makes 100% of its annual required contributions (ARC) and in
fiscal 2012 its ARC is $11.6 million, a manageable 7.8% of general fund
spending. In 2010, the county contributed an additional $2.6 million to prepay
the remaining costs of the 2007 Voluntary Retirement Incentive Program, thus
reducing annual required contributions to the pension plan in the future. Other
post-employment benefit (OPEB) costs are limited due to the elimination of
retiree health benefits beginning in July of 2006. The county makes
pay-as-you-go payments and had unfunded actuarial accrued liabilities of a
modest $3.3 million as of Jan. 1, 2010.

Additional information is available at ''. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

In addition to the sources of information identified in the Tax-Supported Rating
Criteria, this action was additionally informed by information from Creditscope,
S&P/Case-Shiller Home Price Index, IHS Global Insight,, and National
Association of Realtors.

Applicable Criteria and Related Research:

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