OREANDA-NEWS. Fitch Ratings has affirmed the following rating on Horry County, South Carolina (the county):

--\\$88.6 million general obligation (GO) at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of Horry County backed by the full faith, credit, and taxing power of the county.

KEY RATING DRIVERS

TOURISM-BASED ECONOMY: Horry County's economy is highly dependent on the leisure and hospitality sectors in addition to retail, each vulnerable to changes in regional macro-economic conditions. This risk is somewhat offset by Myrtle Beach's sustained popularity as a leisure destination.

SOUND FISCAL MANAGEMENT: The county continues to exhibit strong financial operations with a diverse mix of revenue streams, a relatively flexible expenditure environment and sizeable reserve levels.

AFFORDABLE DEBT PROFILE: The debt burden is moderate and reflects the county's prudent leveraging of its tourism-based revenues to finance capital needs arising from population growth and increasing tourism.

RATING SENSITIVITIES

STRONG FINANCIAL RESERVES: The rating is sensitive to shifts in fundamental credit characteristics including the county's maintenance of strong financial reserves due to the inherent vulnerability of a cyclical economy. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely over the near to medium term.

CREDIT PROFILE

Situated in the northeastern corner of South Carolina, Horry County has more than 50 miles of the Atlantic Ocean coastline commonly known as the Grand Strand. The 2014 resident population of 298,832 is up over 50% from the 2000 level and has grown at 3% annually.

TOURISM-DRIVEN LOCAL ECONOMY

The Myrtle Beach Area Chamber of Commerce reports the area hosted approximately 17.2 million visitors in 2014, up 7% year-over-year. Seasonal residents drive the population of the county to nearly 700,000 on peak days. Tourism dominates Horry County's economy and accounts for approximately 70% of county employment.

Economic indicators are trending in a favorable direction. Solid gains in retail sales and tourism-sensitive taxes and fees underscore the county economy's rebound from recessionary declines. The county's unemployment rate remains elevated at 7.1% for May 2015 and above both the state and national levels. This is up from 6.3% a year earlier, but down from 8.2% two years prior. Median household income was 95% and 80% of the state and national levels, respectively.

The county's tax base has flattened since 2010 after rapid growth during the housing boom. This includes the results of the five year reassessment that slightly lowered the total taxable assessed value (TAV) for fiscal 2015. The county estimates modest TAV growth in the medium term future. Fitch believes this a reasonable estimate given the stabilization of commercial real estate in late 2014 and increased permit activity into 2015. Residential assessed value is only a quarter of the composition of the county's TAV, but saw record residential building permit activity in June 2015.

STRONG FISCAL MANAGEMENT AND AMPLE RESERVE LEVELS

The county's sound finances benefit from prudent fiscal management and a stable property tax revenue stream that accounts for over half of general fund revenues.

After multiple recent years of large surpluses, the county ended fiscal 2014 with a modest \\$605,000 (0.5% of general fund spending) operating deficit. The 2014 results reflected a favorable budgetary variance driven by conservative budgeting of expenditures. Unrestricted fund balance totaled \\$41.2 million or an ample 31.7% of spending and complied with the county's fairly conservative reserve policy to maintain 15% of the operating budget in reserves.

The county's original fiscal 2015 budget included a \\$7.8 million use of fund balance (6% of projected spending) and no revenue enhancements. Management currently expects a \\$2.5 million operating deficit at year-end leaving fund balance a healthy 29.5% of spending. The positive year-to-date budgetary variance is driven by the county's conservative planning and a 3% positive revenue variance and 6% expenditure budget variance.

The 2016 budget is balanced with a 7.2 mil tax increase. The county discontinued the practice of using reserves to balance the operating budget, alleviating Fitch's potential concern about successive operating deficits. The budget funds \\$13.9 million for capital improvements projects and a \\$3 million cost of living adjustment. The increased millage allows for an increase in paygo capital spending and should lower the amount of future debt issuance required.

FAVORABLE DEBT PROFILE

Overall debt, including overlapping debt from schools and incorporated municipalities, is a moderate \\$2,816 per capita and 2.2% of property market value. The county's high debt service (17.5% of governmental spending) reflects the very rapid rate of amortization with 83% of principal retired within five years.

Debt levels incorporate significant county funding of road projects through state infrastructure bank (SIB) loans that account for 63% of direct debt. This debt is supported by a hospitality fee paid predominantly by visitors and has come in higher than projected. The debt is currently expected to be paid off in fiscal 2019 at which time the 1.5% hospitality fee sunsets.

The five-year capital improvement plan (CIP) totals \\$117.4 million and includes a modest \\$24.1 million in funding anticipated from GO bonds in 2019 to fund a critical services facility.

MODEST PENSION & OPEB COSTS

Long-term liabilities related to pension and other post-employment benefits (OPEB) represent a small portion of county spending and as a result are not expected to pressure future operations. Substantially all county employees are members of the South Carolina Retirement System (SCRS) or the Police Officers Retirement System (SCPORS). Both plans are cost-sharing multiple-employer pension plans.

In fiscal 2014, the county paid the full annual required contribution (ARC) of \\$9.8 million or a low 3.5% of spending. As of 2014 valuations the funding level of the SCRS and SCPORS were a low 59.3% and 65.6% respectively, using Fitch's more conservative 7% return on investments. The county's contributions remain affordable despite increasing each year.

The county also provides OPEB to its retirees. The county funds its OPEB cost on a pay-go basis, which accounted for less than 1% of spending in fiscal 2014. As of 2014, the unfunded actuarial accrued liability (UAAL) associated with OPEB totaled \\$28.2 million or 1.4% of taxable assessed value.

Total carrying costs including debt service, pension ARC and actual contribution for OPEB were a sizable 21.3% of government spending in fiscal 2014, largely due to the rapid debt amortization.