Fitch Rates St. Louis County, Missouri ULTGOs 'AAA'; Outlook Stable
NEW YORK -- March 22, 2013
Fitch Ratings has assigned an 'AAA' rating to the following St. Louis County,
Missouri unlimited tax general obligation bonds (ULTGOs):
--$49.9 million general obligation (GO) bonds (courthouse projects) series
Bonds will finance a portion of the cost of a new family court building. The
bonds are expected to sell the week of April 2 via negotiation.
In addition, Fitch affirms the following ratings at 'AAA':
--$63.3 million GO bonds series 2012.
The Rating Outlook is Stable.
General obligation bonds are secured by the county's full faith and credit and
its ad valorem taxing power, without limitation as to rate or amount.
KEY RATING DRIVERS
DIVERSE ECONOMIC BASE: The diverse economic base provides substantial
employment opportunities for county residents in a variety of higher wage
ABOVE-AVERAGE SOCIOECONOMIC PROFILE: Wealth levels are above average, both on
a per capita income and market value per capita basis.
STRONG FINANCIAL MARGINS: The county continues to produce positive financial
results due to budgetary conservatism and strong expenditure control.
AFFORDABLE DEBT LEVELS: Debt levels are moderate and affordable, and future
borrowing plans are manageable.
CONTINUED STRONG FINANCIAL MANAGEMENT: The rating is sensitive to the
continuation of strong financial management and control policies which have
produced favorable financial results and maintained considerable margins of
St. Louis County is located in eastern Missouri, near the Illinois border, and
contains just above one million residents over 524 square miles. It benefits
from its proximity to the city of St. Louis, which serves as a major economic
center for the region. The county includes the affluent suburbs of St. Louis,
but excludes the city proper, limiting vulnerability to urban social service
DIVERSE ECONOMIC BASE
St. Louis County has a well-developed economic base, which continues to
diversify away from manufacturing, thus shielding the economy from large
cyclical swings in the manufacturing sector. The regional economy's employment
base consists of a higher level of both professional services and educational
and health services as a percentage of total employment than the national
average. Major employers include Boeing Co. with roughly 14,700 employees,
Washington University (13,600), and SSM Health Care System (11,300).
Assessed valuation (AV) began declining in fiscal 2009, and by fiscal 2011 was
down an aggregate 10.6%. AV showed slight growth in fiscal 2012, but county
forecasts assume further modest declines, which Fitch believes is prudent
given recent home price trends. The tax base is diverse with the top 10
property taxpayers accounting for 5.3% of total assessed valuation. County
unemployment continued its decline on a year-over-year basis, from 7.3% in
December 2011 to 6.1% in December 2012. The rate remains below the state
(6.5%) and nation (7.6%). The most recent year-over-year decline mainly
resulted from a contraction in the labor force; further improvement in the
rate will depend upon employment growth.
ABOVE-AVERAGE SOCIOECONOMIC PROFILE
County residents' wealth levels are above average with 2011 per capita income
levels equaling 135% and 123% of the state and national levels, respectively.
County residents are well-educated with 39% achieving higher education versus
28% for the national average.
STRONG FINANCIAL MARGINS
The county has exhibited strong financial performance with ending
unreserved/unrestricted general fund balances exceeding 26% of spending for at
least the last five years. A $2.8 million net operating surplus, after
transfers, was recorded in fiscal 2011. This was a positive variance from the
adopted budget, which called for the use of $11 million of general fund
The county ended fiscal 2011 with a $121.5 million unrestricted general fund
balance (the sum of committed, assigned and unassigned balances under GASB
54), equivalent to a strong 36.7% of general fund expenditures.
Preliminary results for fiscal 2012 show a modest net operating surplus in the
general fund of $2.2 million, versus the original budget which anticipated a
$29.1 million reduction in general fund balance.
Management has taken steps to control expenditure growth, including a hiring
freeze, wage freeze, and limitations on travel, which has contributed to
financial stability. The fiscal 2012 budget included steep cuts in the area of
parks and recreation, service cuts, fee increases and elimination of
The fiscal 2013 budget continues strong expenditure control, but includes the
first wage increase since 2008. The spending plan includes a $31.8 million
appropriation of general fund balance, of which the county currently expects
to use $4.3 million. The county routinely underspends its budgeted
appropriations and its cash-basis projections often result in more favorable
final results on a GAAP-basis; nevertheless, if the county were to realize its
budgeted draw on general fund balance, reserve levels would still remain
strong, well in excess of the policy goal of 10% of spending.
MANAGEABLE LONG-TERM LIABILITIES
The debt burden is moderate as a result of strong internal capital funding
practices. Direct debt, including annual appropriation debt, equals $469 per
capita and 0.5% of full market value. Overlapping borrowing lifts overall net
debt totals to $2,103 per capita or 2.1% of full market value.
The current issue represents the second installment of a two-phase, $100
million GO debt authorization for a new family court building. Future
borrowing plans are moderate and include approximately $30 million of special
obligation lease revenue borrowing.
The county offers pension benefits to all county employees and commissioned
police officers through the St. Louis County, Missouri County Employee
Retirement Plan, a single-employer, noncontributory, defined benefit plan. The
county routinely makes its full annual required contribution, which in fiscal
2011 equated to 9.4% of general fund spending.
The civilian portion of the plan reports a 72.4% funding ratio, or a somewhat
weak 65.2% when adjusted by Fitch to reflect a 7% discount rate. The police
portion of the plan reports a 65.7% funding ratio, or a weaker-still
Fitch-adjusted 59.2%. The county makes 100% of its actuarially-determined
annual required contribution each year and has no other post-employment
benefit (OPEB) liability. Carrying costs for pension and debt service are
affordable at 12.4% of governmental spending (net of the capital projects
Additional information is available at 'www.fitchratings.com'. 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 Fitch's Tax-Supported
Rating Criteria, this action was additionally informed by information from
Creditscope, University Financial Associates, S&P/Case-Shiller Home Price
Index, IHS Global Insight, National Association of Realtors, Financial
Advisory and Bond Counsel.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.
Arlene Bohner, +1-212-908-0554
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Stephen Friday, +1-212-908-0384
Amy Laskey, +1-212-908-0568
Elizabeth Fogerty, +1-212-908-0526 (New York)
Press spacebar to pause and continue. Press esc to stop.