Prince William County, one of a number of triple-A rated counties in Virginia, is feeling the effects of the nationwide housing downturn with a negative outlook on all its outstanding debt from Fitch Ratings.
Fitch affirmed the county’s $655 million of general obligation bonds at AAA, as well as $209 million of certificates of participation at AA-plus, both with negative outlooks.
The AAA rating and negative outlook also were assigned to the county’s $46.9 million of GO public improvement bonds that sold on Tuesday to Robert W. Baird & Co. at a 4.1268% true interest cost. Moody’s Investors Service rated the bonds Aa1 with a stable outlook. Standard & Poor’s does not rate Prince William County.
Fitch said its negative outlook reflects the concern that continued deterioration in the housing market and a relatively high foreclosure rate could weaken the local economy’s strong momentum and pressure budgetary stability.
“Stress from the housing market downturn has permeated the county’s employment base, specifically in the construction sector, and has resulted in revenues from recordation, sales, consumer utility, and business, professional, and occupational license taxes all below budgeted levels in fiscal 2008,” Fitch said in a report on Tuesday.
The fiscal 2009 budget includes a sizable property tax rate increase to offset a decline in taxable assessed value. However, Fitch said substantial projected increases in the tax rate may diminish Prince William County’s competitive environment compared to neighboring jurisdictions.
The adopted fiscal 2009 budget is balanced with an increase in the property tax rate, the second year of rate hikes after more than five years of property tax rate reductions. The tax rate — once the highest in northern Virginia — should provide some flexibility to offset the decrease in home values, although projected tax increases between fiscal 2009 and 2014 may reduce the county’s competitive advantage within the region, Fitch said.
Fitch said its AAA rating on the GOs reflects the county’s strong economic indicators, including low unemployment and above-average wealth levels, sound fiscal management, an expanding and diversifying economy, and a moderate and rapidly retiring debt burden.
Despite mounting pressure on revenues, fiscal operations remain relatively stable, guided by closely monitored expenditure controls, regular financial reporting, and multi-year financial forecasting, the rating agency said.
Fitch said Prince Williams’s fiscal 2009 to 2014 capital improvement plan is a sizable $957 million and consists primarily of transportation and school needs. About 84% of the capital plan is expected be funded through future debt issuance. Overall debt levels are moderate at $2,791 per capita.