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Pam Dubois From: Sent: Subject: zenia.krause(~fitchratings-com' Wednesday, July 02, 2003 3:38 PM Fitch Rates Cabarrus County, NC's $40.1MM COPS 'AA-' Fitch Rates Cabarrus County, NC's $40.1MM COPS 'AA-' Fitch Ratings-New York-July 2, 2003: Fitch Ratings assigns a 'AA-' rating to Cabarrus County, North Carolina's (the county) $40,055,000 certificates of participation (COPs), series 2003. The certificates are scheduled to price July 23 through negotiation led by UBS Financial Services Inc. and First Southwest Company. Fitch also affirms the 'AA' rating on the county's approximately $56 million outstanding general obligation bonds. The Rating Outlook is Stable. The 'AA-' rating on the 2003 COPs reflects sound lease provisions and the county's underlying credit quality. County credit characteristics include solid financial management, low property tax rates, moderate debt levels with above-average amortization, and a diversifying economic base, although some taxpayer concentration still exists with Philip Morris accounting for 9.6% of assessed value (AV) in fiscal 2002. Strong fund balance reserves have been significantly drawn upon in fiscal 2002, and will be drawn upon again in fiscal 2003 and fiscal 2004. Fitch expects structural balance to be restored in fiscal 2005 and that unreserved general fund balances will remain solid at a minimum of the board's targeted level of 15% of expenditures. The local economy has felt the effects of the national economic slowdown as businesses reduce workforces and the county's top employer announces the possibility of bankruptcy. At 5.8% the county's unemployment in April, however, still remains lower than the state and nation at 6.1% and 6% respectively. The certificates are secured by installment payments made by the county to the trustee, as assignee of the Cabarrus County Development Corp., which is a non-profit corporation created to assist the county in financing public projects. Payments are equal to debt service on the COPs and are subject to annual appropriation. The certificates will provide funding for property acquisition, construction and equipping of two elementary schools, one middle school and additions to two other elementary schools. The three'new school facilities serve as collateral for these COPS; and their essentiality to the county provides incentive to budget and appropriate installment payments. Cabarrus County is located northeast of Charlotte in the growing Piedmont section of the state. Sine the 1990 census population has increased a strong but manageable 42% to an estimated 2002 population of 140,182. School enrollment growth has been rapidly increasing at an annual rate of 3.7% over the last 5 years and projected to grow at 4.2% for the next several years. The county's employment base has somewhat diversified away from its traditional textile manufacturing base. The county is home to the Lowe's Motor Speedway, a sports and recreational facility that seats 167,000 people; and Concord Mills, a 1.4 million square foot mall facility. Because of the downturn in the economy, Corning Inc. has significantly reduced the number of employers at its plant, but continues to pay taxes. In addition, Plllowtex Corporation, the county's largest employer with 4,000 employees, has announced that it may seek bankruptcy protection for the second time. The county has a long history of maintaining substantial reserves well in excess of state guidelines and of its own target of maintaining an undesignated general fund balance at 15% of expenditures and transfers out. !