Fitch Affirms Hendricks County, IN's GO Bonds at 'AA+'; Outlook Stable

Fitch Ratings takes the following rating action on Hendricks County, Indiana's (the county) bonds:

--$4.91 million general obligation (GO) bonds, series 2007, affirmed at 'AA+'.

The Rating Outlook is Stable.

SECURITY

Series 2007 bonds are general obligations of the county, subject to the provisions and the limitations of the state's constitution, payable from ad valorem taxes levied on all taxable property within the county.

KEY RATING DRIVERS

ADVANTAGEOUS LOCATION: Hendricks County benefits from its close proximity to Indianapolis and its steadily growing, diverse economy.

ABOVE-AVERAGE ECONOMIC INDICATORS: Strong economic indicators include above-average wealth levels and consistently below-average unemployment rate.

SOUND FINANCIAL PERFORMANCE: The county has managed multiple general fund operating surpluses, improved cash-basis reserves and maintained financial flexibility despite property tax revenue declines caused by Circuit Breaker legislation.

MIXED DEBT PROFILE: The county's overall debt burden is high due to significant underlying school district issuances. Amortization is average with capital needs funded on a pay-go basis. Carrying costs for debt service, pensions and other post-employment benefits (OPEB) are moderate.

RATINGS SENSITIVITIES

CONTINUED STRONG FINANCIAL POSITION: The rating is sensitive to shifts in fundamental credit characteristics including the county's strong financial management practices. The Stable

Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

Hendricks County is located immediately west of Indianapolis, IN (rated 'AAA' by Fitch) and is well situated along major interstates, just outside of the I-465 loop that surrounds Indianapolis. The county seat is Danville, with major cities/towns including Plainfield, Avon, and Brownsburg. County population increased a strong 51% since 2000 to 153,879 in 2013.

ABOVE-AVERAGE ECONOMIC PERFORMANCE

The county economic base benefits from its proximity to Indianapolis and features a relatively diverse tax base including healthcare, utility, manufacturing and retail. Unemployment rates in the county have been consistently low and averaged 4.7% for 2014, below both state and national averages. County employment growth has been above average over the past five years but is expected to be more modest in coming years. County wealth and income levels are above state and national averages.

County assessed valuation (AV) was stable through the recent economic downturn after an 18% AV decline in 2009 due to a new homestead exemption. The drop was followed by modest aggregate growth of 4.9% between 2010 and 2013 followed by stronger growth in 2014 and 2015 which totaled 9.5%. New development activity is expected to maintain a modestly positive AV trend over the next few years. The county's tax base is diverse with little concentration among the top tax payers which include a large utility and several retail and distribution firms. Fitch expects the county's economic performance to be stable and remain above average.

STRONG MANAGEMENT PRACTICES; IMPROVED RESERVES

Conservative, long-term forecasting has enabled the county to align revenues and expenditures while facing the effect of Circuit Breaker legislation which reduced property taxes. County general fund operating performance over the past three years has exceeded projections resulting in mostly surpluses and strengthened ending cash balances across the county's major funds including the general and rainy day funds.

The county's general fund balance was $8.7 million or 28% of spending inclusive of the income tax fund on a cash-basis for fiscal 2013, the last year of audited financials. Unaudited performance for fiscal 2014 indicates balances consistent with prior year. Ending balances are strong; however, cash-basis reporting, which is the norm for IN counties, does not provide the detail and transparency of GAAP-basis reporting.

The county has consistently contributed excess income tax money into a rainy day fund, outside of the general fund. The unaudited 2014 balance for the rainy day fund is expected to remain strong at $10 million, equivalent to a strong 30% of general fund spending. The county adopted formal fund balance policies for its various funds including the general, income tax and rainy day funds. The county expects to maintain at least $10 million in the rainy day fund. Fitch expects the county to continue to maintain budgetary balance and solid reserves on a cash basis.

MODERATE DEBT

The county's overall debt is high at 10.2% of AV and $5,007 per capita. This is due mostly to borrowing by local schools, libraries and townships. County debt includes the GO bonds and various leases. General fund carrying costs for bonds and leases is moderate at 5.2% of spending. Direct debt amortization is average and the county does not have plans to issue additional debt in the near future. Capital improvements of $3 million-$5 million annually are pay-go funded.

MANAGEABLE PENSION AND OPEB COSTS

The county annually contributes to the Indiana Public Employees Retirement Fund (PERF), the County Police Retirement, and the County Police Benefit Plan to fund employee pensions. PERF is an agent multiple-employer defined benefit program while the two other plans are single-employer defined benefit programs. Pension contributions are moderate and the county regularly contributes 100% of the actuarially required payments.

OPEBs are being funded on a pay-as-you-go basis. Total contributions for pensions and OPEB for fiscal 2013 totaled approximately $8 million. Fitch expects overall carrying costs for debt, pensions and OPEB to remain moderate at 18% of spending.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates and IHS Global Insight.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=980803

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.