Fitch Ratings assigns an 'AA-' rating to the following Ulster County, NY (the county) public improvement refunding bonds:

--$62,855,000 public improvement refunding bonds, 2012.

In addition, Fitch affirms its 'AA-' rating on approximately $64.9 million outstanding unlimited tax general obligation (ULTGO) bonds.

The Rating Outlook is Stable.

The bonds are expected to sell via negotiated sale on or about April 10, 2012.

SECURITY

The bonds are general obligations of the county secured by the county's full faith and credit and unlimited taxing power, subject to a 2011 state statute limiting property tax increases to the lesser of 2% or an inflation factor. This limit can be overridden by a 60% vote of the county board.

KEY RATING DRIVERS

STABLE FINANCES WITH CHALLENGES: The county's financial profile is sound with healthy reserve levels. Fitch believes, long-term budget stability will be challenging given increases in state mandated expenses and employee pension and health care costs, and contingent liabilities related to solid waste and the county-owned nursing home. Fitch would view favorable the execution of the county's current plan for the nursing home facility as it would significantly decrease the county's future liabilities.

PRO-ACTIVE MANAGEMENT OF EXPENSES: Management has been pro-active and successful in achieving operating efficiencies through conservative budget practices, consolidation of county operations, shared services, and reductions in work force.

FAVORABLE ECONOMIC PROFILE: The county benefits from its close proximity to New York City and Albany, a growing population, below average unemployment, and a stable economic base centered on tourism, the State University of New York (SUNY) New Paltz and agriculture.

MANAGEABLE LONG-TERM LIABILITIES: The county's overall debt burden is low and is expected to remain stable due to limited capital plans and average debt amortization. Pension and other post-employment benefits (OPEB) are manageable.

TAX LEVY LIMIT: The bonds are rated on parity with outstanding ULTGO debt because the county may exceed the tax cap in any one year with 60% approval of the governing board and the tax cap legislation does not exempt outstanding ULTGO debt service.

CREDIT PROFILE

DIVERSIFIED ECONOMIC BASE

Ulster County is located in the east central portion of the state in the Catskill region, approximately 90 miles from New York City and Albany. Given the easy access from New York City, the county has developed a strong tourism sector. The county is home to Woodstock, a large art and cultural center, and the Catskill and Shawangunk Mountains which provide recreational activities year around. Tourism grew by 13% in 2011, as evidenced by higher hotel tax and sales tax revenue. The agriculture sector remains strong as the county is the state's largest producer of fresh market apples and sweet corn. In addition, horse breeding has become a major industry with over 50 horse facilities, 10 of which are used for breeding race horses.

The State Correctional Facilities and the SUNY New Paltz, with 8000 students, provide stability to the economy. The county's unemployment rate at 7.8% in December 2011 remains below state (8%) and national (8.3%) averages. County income levels are comparable to those of the state and nation.

SALES AND PROPERTY TAXES PERFORMING WELL

Sales tax is the major source of general fund revenue, comprising 35% in 2010. In 2009, sales tax revenues declined by 8% due to recessionary pressures but rebounded in 2010, coming in 4.1% above budget.

Property taxes provide the second largest general fund revenue source at 23%. The property tax base is diverse and the top 10 taxpayers comprise 12.5% of taxable value. The tax base has been fairly steady over the last few years and benefits from a relatively stable housing sector. Although, housing prices remain below the previous highs, the county did not experience the extreme price fluctuations over the last several years seen in other parts of the nation.

PRO-ACTIVE MANAGEMENT OF EXPENES PRODUCES STABLE FINANCIAL OPERATIONS

With the exception of a small operating deficit after transfers in 2009, the county has achieved general fund operating surpluses after transfers in every year since 2006. In 2009, sales tax revenues declined by 8% due to recessionary pressures. To offset the decline, management implemented expenditure reductions by cutting approximately 100 positions resulting in a $4 million savings. In 2010, sales tax rebounded, totaling 4.1% above budget. Reserve levels are healthy with an unreserved general fund balance equal to 9.9% of spending at Dec. 31, 2010.

Positive financial results continued in 2011, driven primarily by strong sales tax growth with better than budget results, increasing by 3.3% or $2.8 million above budget. In addition, hotel taxes hit the $1 million mark (just 0.4% of general fund revenue) for the first time since 2008 due to strong growth in the tourism sector. On an unaudited basis, the county will only use approximately $4 million of the budgeted $12 million of appropriations from the general fund. Management continued to pro-actively reduce expenditures via the elimination of 75 positions, implementation of a self-insurance plan for health benefits, the sale of the certified home health agency, and restructuring the Department of Public Works.

CONSERVATIVE 2012 BUDGET ASSUMPTIONS

For fiscal 2012, management continues to budget conservatively and streamline operations verses increasing taxes. The $295 million general fund budget grew 3.5% over 2011. The 2012 budget is balanced and relies on $10.8 million in appropriations from the general fund. If completely used, the general fund balance would decrease to approximately $28 million, or a still adequate 10.2% of 2010 expenditures. Sales tax revenues are conservatively projected to increase by 2% from 2011 estimated receipts; as of Feb. 15, 2012, sales tax collections were 2.8% ahead of budget. Fitch believes these assumptions are conservative given the county's past results. Management will absorb higher fixed costs in fiscal 2012 through operational efficiencies via the elimination of 23 positions and the restructuring of Mental Health Services which combined will save approximately $2.5 million.

INCREASING FIXED COSTS MAY CHALLENGE OPERATIONS

Like many New York counties, Ulster's long-term budget stability will be challenging given increases in state mandated expenses and employee pension and health care costs. The county participates in the New York State and Local Employees Retirement System (ERS) a cost-sharing multiple-employer defined benefit pension plan. The county contributes the full amount of its required contribution annually, equal to approximately 4% of spending for fiscal 2010. Payments have increased substantially over the last few years and are budgeted for $16.8 million in 2012, a 24% increase from the 2011 payment and up to approximately 6.3% of spending. The county currently funds its OPEB liability on a pay-go basis. As of Dec. 31, 2010, the county's OPEB liability totalled $140 million or a modest 0.7% of market value.

Fitch also notes additional financial pressure from contingent liabilities related to the Golden Hill Health Care Center, the county-owned nursing home and the county's Resource Recovery Agency (the agency). The nursing home facility operates at a deficit, receiving subsidies from the county which totalled $1.1 million in 2010 and are estimated at $3.3 million for 2011. In 2011, the county legislature approved a plan for the restructuring of the nursing home. The first phase involves the creation of a Local Development Corporation (LDC) which would allow for specific bonding and a lease back to the county for operational purposes. Phase two involves the LDC identifying a borrower and the sale of the facility. The county included $5.6 million in its 2012 budget (2.1% of spending) and is planning for another increase for fiscal 2013, at the end of which the county hopes to complete a sale. Fitch would view favorable the successful implementation of this plan as it would limit what would likely be a growing contingent liability over time.

Fitch is less concerned about the county's exposure to the resource recovery facility as legislature oversight enables the county to manage costs as opposed to rapidly growing health care expenditures. Under an agreement, the county is liable for an annual service fee payable to the agency which amounted to $1.4 million in 2010 and 2011.

LOW DEBT PROFILE

The county's credit profile benefits from low overall debt and modest future borrowing. Overall debt is manageable at $1,543 per capita and 1.4% of market value. Debt service in 2010 comprised a modest 4.3% of combined general and debt service fund expenditures. Direct debt includes bonds issued by the county to fund capital expenditures of the Ulster County Community College as well as the outstanding debt of the Ulster County Resource Recovery Agency, for which the county is obligated to fund operating deficits through payment of an annual service fee.

Fitch expects debt levels to remain stable given average amortization and modest future capital plans. The fiscal 2012-2017 capital improvement plan (CIP) anticipates $69 million of expenditures, focused on transportation, public health and education, the majority to be funded by state and federal contributions.

The series 2012 bonds are being issued to refund all or a portion of the $21,475,000 outstanding principal balance of the Series 2005A Bonds and to refund all or a portion of the $40,965,000 outstanding principal balance of the series 2006 bonds. The county expects to realize a savings of approximately $2.5 million on a level basis with no extension of maturities.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com and, National Association of Realtors.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 15, 2011);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842

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