Fitch Affirms Greenville, South Carolina's GOs at 'AA+'; Outlook Stable

In the course of routine surveillance, Fitch Ratings affirms the 'AA+' rating on Greenville, South Carolina's (the city) approximately $13 million in outstanding general obligation (GO) bonds. The Rating Outlook is Stable.

The 'AA+' rating is based on the city's solid financial flexibility, guided by prudent reserve policies; comprehensive capital planning with inclusion in the budget of the operating impact of capital projects; manageable direct debt levels; and the city's role as the commercial and retail center for the economically strong and diverse Greenville area. These credit strengths are balanced by above-average overlapping debt levels and unusually high unemployment rates for this rating category.

Greenville is located in northwestern South Carolina, along Interstate 85 between Charlotte and Atlanta. The trend of population decline experienced during the 1990s appears to have reversed, and the city is now home to nearly 60,000 people, an increase of roughly 7% since the 2000 census. Area employment remains centered on service and trade sector jobs, and although manufacturing continues to be important to the area, the concentration in this sector continues to diminish. The city's economy benefits from continued development at the Clemson University - International Center for Automotive Research, a 250-acre advanced-technology research campus and home to BMW, Michelin, Sun Microsystems, Microsoft, and others that have invested over $200 million to date. The city's unemployment rate is unusually high for this rating category and has increased significantly year-over-year; the city's unemployment rate in August 2009 was 15.1% (preliminary), up from 9.7% in August 2008, but in line with the percentage increase for national unemployment year-over-year. Wealth indicators for the city are mixed; median household income is below the state and nation, but per capita indicators are closer to national levels.

The city's financial flexibility is consistently strong as demonstrated by solid and stable reserve levels, and is guided by a prudent fund balance policy that requires an unreserved balance of 20% of appropriations. Fiscal 2008 closed with an unreserved general fund balance equal to 22.2% of spending, and fiscal 2009 reserves are expected to meet policy guidelines. The fiscal 2010 general fund budget totals $65.3 million, representing a 2.4% decrease from fiscal 2009, and conservatively factors in declines in fees and permits and intergovernmental revenue. The city's ability to maintain reserve levels and overall financial flexibility despite pressure from economic contraction is a key rating driver.

Direct debt levels are moderate; however, with the inclusion of the city's share of overlapping county and school district debt, overall levels rise to above-average levels. Reflecting conservative debt limits imposed by the state, the city has only a small amount of direct GO debt; officials anticipate the issuance of roughly $4.6 million in GO bonds in late fiscal 2010. Additional city debt includes tax increment financing bonds, certificates of participation, and revenue bonds issued for various enterprises. The five-year capital improvement plan through fiscal 2014 totals a manageable $44 million, which will be funded with a combination of state and federal grants, GO bonds, sewer and storm water funds, general fund contributions, and other pay-as-you-go sources. Fitch notes the operating budget's inclusion of the impact of capital projects as a credit strength.

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