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Public Finance
Tax SupportedNew Issue
Prince George’s County, Maryland
Ratings
Rating Rationale
 
Prince George’s County’s revenue-raising flexibility from its two main revenuesources has become even more limited recently, and reserves have deterioratedfrom the high levels earlier in the decade. To date, the county has demonstratedan ability to maintain reserves at policy levels that are consistent with the ratingcategory, although revenue limitations and expenditure pressures have increasedthe challenges of preserving reserves and obtaining a structurally balanced budget.
 
The county benefits from its central location in the national capital region and itswell-developed transportation infrastructure, attracting a strong base centeredupon vital government operations and higher education. Prospects for continuedgrowth are strong, as several major commercial and residential developments areunderway.
 
Solid tax base growth is projected for at least the next few years, buttressed byadditional development, Maryland’s three-year phase-in of reassessment growth,and the homestead tax credit.
 
Mixed economic indicators include unemployment below the national level and atthe state average and the highest foreclosure rate in the state. Wealth levels are ator above that of the nation’s and at or below those of the wealthy state, althoughthese figures may be skewed by the large military and student population.
 
The county’s debt burden should remain affordable given its rapid amortization,projected tax base growth, and willingness to defer capital spending.
 What Could Trigger a Downgrade?
 
Failure to preserve adequate reserve levels, to maintain financial flexibility, or toregain structurally balanced budgets in spite of revenue raising limitations andspending pressures, could result in a downgrade.
Credit Summary 
The ‘AA+’ rating reflects the county’s limitations on increasing the real property tax rate,solid though declining reserves, economic and projected tax base growth, and moderatelylow debt levels. The Negative Rating Outlook reflects the county’s decreased financialflexibility and the challenges towards obtaining a structurally balanced budget. The countyhas experienced general fund budget deficits and consequent reductions in reserve levelssince fiscal 2007. In response, the county has implemented stringent expenditure controls,utilized one-time revenue enhancements, including the reserves of other funds, and raisedtax rates. Fitch Ratings is concerned that spending pressures, the property tax rate cap,and an income tax recently raised to the maximum level will restrict the county’s ability tomaintain reserves and achieve structural balance through recurring revenues at levelsappropriate for the rating category. Economic prospects are strong, as several majorcommercial and residential developments are under way, likely providing additional taxrevenue for several years due to Maryland’s three-year phase-in of property assessments.The county’s debt burden should remain affordable given its rapid amortization andprojected tax base growth. Further deterioration of reserves and the inability to implementa budget that minimizes the use of one-time revenue enhancements will place downwardpressure on the rating.
New Issues
General Obligation ConsolidatedPublic Improvement Tax-Exempt Bonds, Series 2009A AA+General Obligation ConsolidatedPublic Improvement Bonds (Tax-Exempt Bonds) or (Taxable BuildAmerica Bonds
  
Direct Paymentto Issuer), Series 2009BAA+
Outstanding Debt
General Obligation BondsAA+
Rating Outlook 
Negative
a
 
a
Revised from Stable on Sept. 23, 2009.
 Analysts
Barbara Ruth Rosenberg+1 212 908-0731
barbara.rosenberg@fitchratings.com
Jessalynn Moro+1-212 908-0608
jessalynn.moro@fitchratings.com
New Issue Details
Sale Information:
Approximately$26,450,000 General ObligationConsolidated Public Improvement Tax-Exempt Bonds, Series 2009A, and$36,850,000 General ObligationConsolidated Public Improvement Bonds(Tax-Exempt Bonds) or (Taxable BuildAmerica Bonds
Direct Payment toIssuer), Series 2009B, competitively onSept. 29.
 Security:
Secured by Prince George'sCounty's full faith and credit, subject tothe limitations of sections 812 and 813 ofthe county charter. Section 812 limits realproperty tax rate to $0.96 per $100 ofassessed valuation. Section 813 requiresthat certain taxes and fees may not beincreased without voter approval.
 Purpose:
To finance various capitalprojects, including county buildings,public safety communication system,transportation, and solid waste.
 Final Maturity
: Series 2009A: serially,Sept. 15, 2010
2019; Series 2009B:serially, Sept. 15, 2020
2029.
 www.fitchratings.com September 25, 2009
 
Public Finance
Located adjacent to Washington, D.C., the county has an economic base that iscentered on vital governmental bureaus and higher education, including Andrews AirForce Base and the University of Maryland. Completion of the initial phase of the$2 billion National Harbor project along the Potomac River and development of otherhotel and retail areas mark asignificant breakthrough for a countyhistorically underserved by thesesectors. Mixed economic indicatorsinclude wealth levels at or above thenation’s and at or below those of thewealthy state, although these figuresmay be skewed by the large militaryand student population, and the July2009 unemployment rate of 7.5%,comparable to the state level andbelow the nation’s 9.7%. Althoughthe county has accounted for aboutone-third of all foreclosure events inthe state over the past year, therehas been limited revenue effects andassessed valuation (AV) growth isprojected to remain sound through atleast fiscal 2011, partly attributable to the three-year phase-in of reassessment growth,the homestead tax credit, and the relatively strong growth of the commercial base.Fitch expects demand for housing in the county to remain strong given the primelocation and relative affordability in the Washington D.C. metropolitan area.The county’s general fund reserves have declined, reflecting a charter mandated tax capand other limitations on the county’s revenue raising ability. Revenue enhancements, oftenconsisting of the utilization of non-recurring revenues, and stringent expenditure controlshave proved insufficient in obtaining a structurally balanced budget. Fiscal years 2007
2008and the projected fiscal 2009 general fund balance decreases reflected the inherentchallenges of maintaining positive financial operations given limited rate raising flexibilityand increased budgetary pressure. While the county raised its income tax rate to the 3.2%maximum, it was unsuccessful in itsattempt to obtain state approval toincrease the homestead tax credit andthe transit tax; consequently, revenueenhancements in fiscal 2009 includedthe use of one-time sources. Additionalone-time revenue enhancements werenecessary to balance the fiscal 2010budget, including appropriating$25 million of undesignated fundbalance and budgeting $30 million offund balance from M-NCPPC (PrinceGeorge’s County). Projections indicatethat fiscal 2010 unreserved fundbalance levels would be around 15% ofgeneral fund spending, givenunreserved designations thatapproximate those of fiscal 2008, afully funded charter contingency at 5% of the budget, and a stability reserve equal to 2% ofthe budget. Fitch believes that the county’s limited financial flexibility, given the property
Rating History
Rating ActionOutlook/Watch Date
AA+ Affirmed Negative 9/23/09AA+ Affirmed Stable 5/20/08AA+ Upgraded Stable 6/21/05AA Affirmed Positive 11/24/04AA Affirmed Positive 6/19/03AA Affirmed Stable 9/1/02AA Upgraded
  
 1/6/94AA
Assigned
  
 11/05/92
Related Research
 
Anne Arundel County, Maryland,July 7, 2009
 
State of Maryland, Feb. 23, 2009
Debt Statistics
($000)This Issue 63,300Outstanding Debt 1,109,382
Direct Debt 1,172,682
Overlapping Debt 213,945
1,386,627Total Overall Debt
Debt Ratios
Direct Debt Per Capita ($)
a
1,429As % of Full Market Value
b
1.1Overall Debt Per Capita ($)
a
1,689As % of Full Market Value
b
1.3
a
Population: 820,852 (2008 estimate).
b
Full market value:$106,552,200,000 (fiscal 2010).
2
Prince George’s County, Maryland September 25, 2009
 
Public Finance
tax cap and current income tax rate, and pressures to curtail spending will hamper itsfinancial position if revenues fail to meet the budget or if the county must absorb furtherreductions in state revenue.Conservative debt management, including frequent affordability reviews, rapidamortization, and the ability to reduce capital improvement costs in periods ofeconomic stress have contributed to moderately low debt levels. The county’s overalldebt burden should remain moderate over the life of the $2.1 billion fiscal years2010
2015 capital improvement plan (CIP) given the projections for future tax basegrowth and the county’s rapid principal amortization rate of approximately 66.7% ofdebt retiring within 10 years. Overall debt levels, including general obligations (GOs) ofthe Maryland National Capital Park and Planning Commission that carry an unlimited advalorem tax guaranty from the county, are moderately low at 1.3% of full market valueand $1,689 per capita. The county’s funded position of its pension systems for policeand fire is well below average at approximately 67% and 61%, respectively. Fitch willcontinue to monitor the funded status of the plans and expects the county to continueits past practice of fully funding its annually required contributions.
General Fund Financial Summary
($000, Audited Years Ended June 30)
2006 2007 2008
Property Tax Revenue 511,842 549,169 609,733Sales Tax Revenue 0 0 0Other Tax Revenue 791,084 779,673 720,958Total Tax Revenue 1,302,926 1,328,842 1,330,691License and Permits 29,011 27,493 20,734Fines and Forfeits 1,982 1,717 1,646Charges for Services 25,444 24,500 26,819Intergovernmental Revenue 35,994 29,893 32,258Other Revenue 28,659 44,167 45,446
General Fund Revenue 1,424,016 1,456,612 1,457,594
General Government Expenditures 197,323 196,215 196,818Public Safety Expenditures 408,195 467,373 507,181Public Works Expenditures 0 0 0Health and Social Services Expenditures 25,745 27,750 29,108Culture and Recreation Expenditures 0 0 0Educational Expenditures 605,025 639,904 648,036Capital Outlay Expenditures 0 0 0Debt Service Expenditures 12,557 13,060 16,363Other Expenditures 17,552 17,662 14,782
General Fund Expenditures 1,266,397 1,361,964 1,412,288
General Fund Surplus 157,619 94,648 45,306Transfers In and Other Sources 5,000 18,947 0Transfers Out and Other Uses 127,659 137,975 87,759Other Net Adjustments 0 0 0
Net Transfers and Other (122,659) (119,028) (87,759)
Total Fund Balance 368,976 344,596 302,143As % of Expenditures, Transfers Out, and Other Uses 26.5 23 20.1Unreserved Fund Balance 244,844 209,848 153,501As % of Expenditures, Transfers Out, and Other Uses 17.6 14 10.2Unreserved, Undesignated Fund Balance 128,659 103,870 65,020As % of Expenditures, Transfers Out, and Other Uses 9.2 6.9 4.3
Note: Numbers may not add due to rounding.
Prince George’s County, Maryland September 25, 2009
 
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