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Union County, North Carolina

Union County’s Bond Ratings Affirmed

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Union County’s Bond Ratings Affirmed

Posted on 01/12/17

January 12, 2017, Monroe, NC – Fitch Ratings (Fitch), has affirmed Union County’s $234 million general obligation (GO) debt and Issuer Default Rating (IDR) at AAA and $56.6 million lease obligation bonds (LOBs) at AA. The AAA rating is the best rating available to municipal debt issuers. The outlook on all the ratings is stable.

The AAA IDR and GO rating reflects the County's strong growth prospects, ample reserves, and broad budgetary tools. The rating on the LOBs is one notch below the IDR, reflecting appropriation risk. Key rating factors Fitch identified to establish Union County’s ratings affirmation include:

  1. Revenue Framework - The County has strong revenue control given that the current property tax rate is about half of the cap. Also, strong assessed value (AV) appreciation has generated natural revenue growth that has outpaced GDP and Fitch expects this trend to continue given solid economic prospects.
  2. Expenditure Framework - Expenditures have grown at a pace below revenues, and Fitch expects that trend to continue. Moderate carrying costs and broad flexibility to manage labor-related costs allow the County solid latitude to adjust spending through economic cycles.
  3. Long-Term Liability Burden - The combined burden of debt and unfunded pension liabilities is low in relation to personal income and should remain relatively stable over time based on rapid amortization, manageable borrowing plans and a modest aggregate pension liability.
  4. Operating Performance - The County's superior budget flexibility and ample general fund balance allow it to comfortably manage through economic downturns without diminishing its overall financial flexibility.

“The affirmation by Fitch is due to the hard work and strong fiscal planning by staff and the Board of Commissioners,” said County Manager Cindy Coto.

The county's 2017 proposed budget represents a 2 percent ($5.7 million) increase over the prior adopted budget. The budget includes a 1 cent per $100 of valuation reduction in the tax rate. The major drivers of the budget include a wage increase ($3 million) and an increase in benefit costs ($164,000). Fitch expects fiscal 2017 performance to be consistent with past performance given the county's history of conservative budgeting and maintenance of healthy reserves in accordance with its 20 percent policy requirement.

A complete copy of Fitch’s release can be viewed at: Fitch's Release.