Fitch_Affirms_Cary,_NC_Combined_Enterprise_System_Revs_at_'A(土壤修复概念股)

AUSTIN,December11FitchRatingsaffirmsthe'AAA'ratingonthefollowingrevenuebondsofCary,NorthCarolina:

--Approximately$129millioncombinedenterprisesystemrevenuebondsseries2007and2013.

TheRatingOutlookisStable.

SECURITY

Thebondsaresecuredbyapledgeofandfirstlienonnetrevenuesofthetown'scombinedwaterandsewersystem.Theseries2007bondsarealsosecuredbyadebtservicereservefundprovidedbyasuretypolicy,equaltoaverageannualdebtservice.Adebtservicereservewasnotfundedfortheseries2013bonds.

KEYRATINGDRIVERS

ROBUSTLIQUIDITYANDHEALTHYCOVERAGE:Liquidityremainsveryhighat3xthe'AAA'medianfordayscashonhand.All-indebtservicecoveragehasaveragedaverysolid2.7xoverthelastfiveyears,higherthanthe2.5x'AAA'ratingcategorymedian.However,thesystem'sgrowingdebtcarryingcostsareexpectedtobegintopressureall-inDSC.

LARGEDEBTBURDEN:Debtratioshavegrownconsiderablyoverthelasttwoyearsandarenowwellabovethe'AAA'ratinglevelduetonecessarysystemexpansiontoaddressdischargerequirements.

STRONGMANAGEMENT:Thetownbenefitsfromtalentedfinanceandutilitymanagementteamsthatpracticeconservativebudgetingandlong-rangeplanning.

AMPLERATEFLEXIBILITY:Overthelastseveralyearsmanagementhasinstitutedaseriesofrateincreases,particularlyonthesewerside,tofundconstructionofathirdtreatmentplant.Additionalmodestannualrateincreasesanticipated.UserchargesremainwellbelowFitch'saffordabilitythresholddespitetherecenthikesandfutureplannedadjustments.

HEALTHYECONOMICBASE:Theserviceareaeconomyisstrong,characterizedbyhighwealthlevelsandlowunemployment.Fitchbelievestheserviceterritoryhaslong-termpotentialforcontinuedgrowthanddevelopmentgivenitslocationintheRaleigh-Durhammetropolitanarea.

RATINGSENSITIVITIES

DETERIORATIONOFFINANCIALPOSITION:Failuretopreservethesystem'sstrongfinancialprofiledespitesignificantongoingcapitalpressuresandincreasingdebtloadcouldpressuretherating.Inparticular,healthyliquidityandrobustall-inDSCwillbekeytosupportingthe'AAA'ratinggiventhegrowingdebtburden.

CREDITPROFILE

TheTownofCarybondsrated'AAA'byFitch)provideswaterandsewerservicetoanareawithapproximately55,000customersinandaroundthecommunitiesofCaryandMorrisvilleincentralNorthCarolina,withaserviceareapopulationestimatedofapproximately173,000.CaryalsoprovidesutilityservicetotheRaleigh-DurhamAirport.

COMPLETEDANDPLANNEDEXPANSIONPROVIDEAMPLECAPACITY

Caryrecentlycompletedconstructiononathirdwastewatertreatmentfacility,theWesternWakeRegionalWastewaterManagementFacility.Theexpansionbringstotalwastewatertreatmentcapacitytojustover42milliongallonsperday,whichwillextendtotalsystemcapacityuntilatleast2060.ThefacilitywasbuiltincooperationwithApexandwasnecessarytomeetCary'sobligationtobegindischargingreclaimedwaterbacktotheCapeFearwaterbasin,thebasinfromwhichitdrawsitswatersupply.

WatersupplyisdrawnfromJordanLake.Evenwiththeservicearea'srecentgrowth,thissupplystillprovidesalmosttwicethesystem'saveragewaterdemand.TreatmentisprovidedbytheCary/Apexwatertreatmentplant.Caryowns77%ofthetreatmentplantandoperatesthefacility.Expansionofthecurrenttreatmentplantisontrackforcompletionby2016andwillincreasecapacityto56mgdfrom40mgd.Aspartofthetown'slongtermplanning,CaryisrequestingadditionalwaterallocationsfromJordanLake,enoughtomeetdemanduntil2045.

AMPLERATEFLEXIBILITYREMAINS

Debtlevelshaveincreasedsignificantlyandareforecasttocontinuetoclimbduetosystemcapitalexpansion,butCaryhasbeenphasinginrateincreasestosupporttheplannedcapitalspending.Additionalannualratehikesaveragingapproximately4%areanticipatedthroughfiscal2019.Mostrecentlymanagementhasadjusteditsvolumetricrates,althoughthetownnowanticipatesfutureadjustmentswillprimarilyincreasethefixedbaserate.Despitesizablepastincreasesuserchargesremainaffordablewithacombinedbillat1.1%ofmedianhouseholdincome.ThisamountiswellbelowFitch'saffordabilitythresholdof2%ofMHIandprovidesthesystemwithamplerateflexibilitygoingforward.

STRONGFINANCIALMANAGEMENTANDRESULTS

Financialperformanceremainsrobustbutisanticipatedtosoftenasadditionaldebtisabsorbedintothesystem'scostsstructure.DSConallsystem-relateddebthasaveraged2.7xforthelastfivefiscalyears.Auditedresultsforfiscal2014pointtoadropinDSCto2.1xbutcoveragewasalsoimpactedbytheinclusionofaone-time$5millionadditionaloperatingexpense.Fitch'sanalysisfocusesonall-inDSCgiventhecity'sintentandpracticetorepayutility-relatedGObondsfromwaterandsewernetrevenues,althoughtherevenuesarenotlegallypledged.

Financialmanagementisverystrong,asevidencedbyhealthyliquidity,stringentfiscalpoliciesandconservativebudgeting.Managementprovidedprojectionswhichonlytakeintoaccountrecurringrevenuesandshowcoverageofallsystemdebtdroppingto1.5xin2015beforereboundingto1.9xby2019.FitchexpectsactualDSCtooutpacetheseprojectionswiththeinclusionofsystemimpactfees,whichhaveaverage20%ofoperatingrevenuessincefiscal2009.Theutility'soperatingfundcashpositionofover$63millionattheendoffiscal2014equatestoastrong509daysofcash.Includingthesystem'ssubstantialunrestrictedfundsdedicatedtocapital,reservestotaledover$200million,equaltoalmost1,700daysofcash.

CAPITALNEEDSADDTODEBTBURDEN

WiththecompletionoftheWesternWakeFacilitythefocusofthecapitalimprovementplanshiftstotheexpansionofthewatertreatmentplantscheduledforfiscals2014-2016.Thefiscal2015-2019CIPtotalsjustover$220millionwithapproximately60%oftheCIPtobedebtfinanced.Projectsslatedfromfiscals2018-2019areestimatedtocost$88millionandfocusonadditionalsystemexpansionwhichcouldpotentiallybedeferreddependingondemandneeds.

InJanuary2014,thetownissuedjustover$40millioninsystem-supportedGOdebtandisplanninganotherapproximately$40millionrevenuebondissuanceinearly2015tofundthewatertreatmentexpansionproject.Debttonetplanthasgrownfromamoderate25%infiscal2011to40%infiscal2014.Also,theadditionalleveraginghasincreasedthedebtpercustomerlevelsto$2,237forfiscal2013,andfuturedebt,ifissuedascurrentlyplanned,willpushdebtpercustomerratiotoover$3,000by2018-2.8xthe'AAA'median.TheprojectedelevateddebtlevelsareacreditconcernandFitchbelievesitwillbenecessaryforthetowntomaintainstrongfinancialmetrics,includinghealthyDSCandrobustliquidity,tooffsettherisingdebtburdenandsupportthe'AAA'rating.

DYNAMICECONOMICSERVICEAREA

Thetown'seconomybenefitsfromastrongcommercialpresencewithinthetown'slimits,includingSASInstitute,Inc.,theworld'slargestprivatelyheldsoftwarecompany.TheregionaleconomyisanchoredbynearbyRaleigh,thestatecapital,andResearchTrianglePark.

Severalcollegesanduniversities,aswellasmajorhealthcarefacilities,addbreadthtotheareaemploymentbase.Wealthlevelsarehighascomparedtostateandnationallevelsreflectingthehighlyspecializednatureofthetown'semploymentbase.ThetownunemploymentasofSeptember2014islowat3.9%asofSeptember,wellbelowthestateandnationandhasremainedlowevenduringrecessionaryyears,neverclimbingabove6.5%.Employmentlevelshavealsonotseenadeclinesince2005.Theinpidualpovertyrateofjust6.3%isalsoverylowcomparedtothestateandthenation.

Contact:

PrimaryAnalyst

TeriWenck,CPA

AssociateDirector

+1-512-215-3742

FitchRatings,Inc.

111CongressAvenue,Suite2010

Austin,TX78701

SecondaryAnalyst

AndrewDeStefano

Director

+1-212-908-0284

CommitteeChairperson

DougScott

ManagingDirector

+1-512-215-3725

MediaRelations:ElizabethFogerty,NewYork,Tel:+19080526,Email:elizabeth.fogerty@fitchratings.

Additionalinformationisavailableat''.

InadditiontothesourcesofinformationidentifiedinFitch'sU.S.MunicipalRevenue-SupportedRatingCriteria,thisactionwasadditionallyinformedbyinformationfromCreditscope.

ApplicableCriteriaandRelatedResearch:

--'Revenue-SupportedRatingCriteria';

--'U.S.WaterandSewerRevenueBondRatingCriteria';

--'2015WaterandSewerMedians';

--'2015SectorOutlook:WaterandSewer'.

ApplicableCriteriaandRelatedResearch:

Revenue-SupportedRatingCriteria

U.S.WaterandSewerRevenueBondRatingCriteria

2015WaterandSewerMedians

2015Outlook:WaterandSewerSector

AdditionalDisclosure

SolicitationStatus

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