OREANDA-NEWS. Fitch Ratings has assigned an 'AAA' rating to the following Westchester County, NY bonds:

--$96.2 million limited tax general obligation (LTGO) bonds, 2015 series B (tax-exempt);
--$4.3 million LTGO bonds, 2015 series C (federally taxable);
--$3.95 million LTGO bonds, 2015 series D (tax-exempt).

The bonds are scheduled to be sold via competitive sale the week of Nov. 16. Proceeds will be used to finance various capital projects.

In addition, Fitch affirms the following ratings:

--$324 million county unlimited tax general obligation (ULTGO) bonds at 'AAA';
--$300 million county LTGO bonds at 'AAA';
--$39 million Dormitory Authority of the State of New York (DASNY or the authority) court facilities lease revenue bonds, series 2006 A and B at 'AA+'.

The Rating Outlook is Stable.

SECURITY
The LTGO bonds are payable from a pledge of the county's full faith and credit and unlimited taxing power, subject to a 2011 state statute limiting property tax increases to the lesser of 2% or an inflation factor (the tax cap law). This limit can be overridden annually by a 60% vote of the county board.

The county has pledged its full faith and credit and unlimited taxing power for debt service on outstanding general obligation (GO) bonds issued prior to 2011 (i.e. the ULTGOs). No exemption is made under the tax cap law for debt service on outstanding ULTGO debt; however, the constitutionality of this provision has not been tested.

The DASNY lease revenue bonds are special obligations of the authority, secured by basic rent payments by the county under a lease agreement. The payments are subject to annual appropriation.

KEY RATING DRIVERS
STRONG SOCIOECONOMIC FUNDAMENTALS: The county maintains a diverse economy and benefits from a wealthy tax base and population.

FISCAL DISCIPLINE: Solid financial management is evidenced by conservative budgeting and a demonstrated willingness to reduce expenditures to close budget gaps.

MODEST DEBT LEVELS: Debt levels are affordable and future capital needs appear manageable.

MODERATING PENSION COSTS: The annual required contribution (ARC) for pensions is moderating after several years of rapid growth. The county has been exercising its option to delay current payments to level out pension costs. However, the pension plans are well funded.

LIMITED LABOR PROGRESS: After years of labor strife, the county reached agreements with seven of eight unions that included the first employee health care contributions. However, two-thirds of county employees are in the union whose contract expired in 2011 and continues not to pay for health care. Further, the settled contracts are now expiring.

TAX LEVY LIMIT: The LTGO bonds are rated on parity with outstanding ULTGO debt since the county may exceed the tax cap in any one year with 60% approval of the governing board.

DASNY RATING RATIONALE: The DASNY bonds are notched off the county's ULTGO and considers the strong lease provisions and incentive to appropriate.

RATING SENSITIVITIES
CONTINUED FLEXIBILITY: The rating is dependent on maintaining sufficient flexibility to offset potential future uncertainties.

CREDIT PROFILE

WEALTHY NEW YORK SUBURB

Westchester County, located immediately north of New York City, is one of the nation's most affluent counties. Its wealthy tax base benefits from the strong regional economy and resident income levels rank well above state and national averages. While unemployment increased during the recent economic downturn, the county's July 2015 unemployment rate of 5% compares favorably to the regional, state and national averages.

The county has a diverse tax base that combines wealthy residential areas, several major retail developments, and numerous corporate headquarters, including IBM and Pepsi. The county's largest employers are reportedly stable and recent growth in biotech as well as additions to the county's extensive retail base is diversifying the economic profile. Assessed valuations were down each year since 2008 but increased with the most recent valuation and further stability or growth is expected.

STABLE OPERATIONS AFTER SEVERAL YEARS OF DEFICITS

Similar to all New York counties, Westchester continues to contend with a heavy mandated cost burden, including Medicaid, health insurance, and pension payments. However, the state's assumption of Medicaid costs that exceed 3% annual growth limits the county's exposure. The phased-in state takeover of all growth in the coming years is providing additional financial benefit.

After several years of sizable declines in reserves, 2014 was the third straight year of fund balance growth, albeit modestly, with a $40,000 increase in total fund balance bringing the county's unrestricted fund balance to $144.3 million or 8.2% of expenditures. Sales tax revenue was slightly below budget. Federal aid was well below budget, offset by a reduction in corresponding expenses. Leading revenue sources are the property tax, which made up 31% of 2014 revenue, and the sales tax at 29%.

The 2015 budget again had a flat tax levy. The county executive, now in his second term, is expected to maintain a policy of not increasing the property tax levy. Through the first half of the year, the sales tax is down $20 million, largely caused by lower fuel prices. The county implemented a separation incentive that was accepted by 158 employees, reducing headcount. Through six months, the county is projecting a $29 million deficit, but expects to make this up and have minimal change to fund balance through active expenditure management, particularly with vacant positions. The 2016 budget is currently under discussion, but is expected to be balanced.

LIMITED LABOR PROGRESS

The county's largest union is the CSEA, which has 2,888 members (about two-thirds of all county employees) and whose contract expired at the end of 2011. CSEA members currently do not contribute to health care costs, and past layoffs were in response to an assumption of no change in this position.

After several years of unsettled contracts, the county reached agreements with its other seven unions. In the past the unions did not contribute to health care costs, but all of the settled contracts included employee contributions while also including moderate pay increases. The commencement of employee health care contributions should generate significant savings for the county. Two of the contracts expired at the end of 2014, with the other five expiring at the end of 2015. The county is currently beginning talks to renew the contracts.

MANAGEABLE DEBT BURDEN

The county's debt levels are manageable in relation to its wealthy tax base; market value per capita is high at $160,000 despite recent declines. Overall debt (including that of cities, towns, villages and school districts) totals an above-average $4,414 per capita, but a more modest 2.7% of market value. Debt amortization is rapid with 71% of principal retired in 10 years. The county has a thorough, charter-mandated five-year capital planning process.

WELL-FUNDED PENSIONS; LOW CARRYING COSTS

The county contributes to the state's defined benefit retirement systems. The funding of the state's pension is strong with the state and local employees plan at approximately 84% using a 7% discount rate assumption and the state and local police and fire plan at approximately 85% as of March 31, 2014. Payments have been consistently increasing, but the ARC declined in 2015. The county had the option to amortize a portion of its payment beginning in 2010, but first chose to do so in 2012, and has continued to do so through 2015, with only a small additional amortization planned. Each amortization must be repaid within 10 years. Fitch is not concerned about the deferrals given the expected declines in the ARC; the amortization and repayments will serve to level out the county's overall pension burden.

The unfunded actuarial accrued liability for other post-employment benefits (OPEB) is $2.1 billion, or 1.4% of market value. OPEB costs are expected to decline with reductions in headcount and increased employee healthcare contributions. Carrying costs for debt service, pension and OPEB are a low 12% of government fund spending and are expected to increase slightly in the near future.