Fitch Ratings assigns an 'A-' rating to the following Monroe County, NY (the county) bonds:

--$57,005,000 general obligation (GO) refunding bonds, 2012.

Bond proceeds are expected to advance refund outstanding 2002 and 2003 series public improvement bonds. The bonds are expected to price on or around March 20. The county plans to realize a savings of 7% of the refunded par from the series 2012 advance refunding bonds on a level basis with no extension of maturities.

In addition, Fitch affirms its 'A-' rating on approximately $377 million county GO bonds, various series.

The Rating Outlook is Stable.

SECURITY

The bonds are 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 legislature.

KEY RATING DRIVERS

UPSTATE ECONOMIC CENTER: The county is an upstate New York economic center, with an economy that has experienced substantial diversification away from its historically manufacturing-based roots into health, higher education, and services.

CONSTRAINED FINANCIAL FLEXIBILITY: The county's finances remain constrained by a high fixed-cost burden and characterized by a continued reliance on one-time and intergovernmental revenues sources as well as cash flow borrowing. Management's stated policy to not raise the county's property tax rate, which has not changed since 2008, restricts restoration of structural balance primarily to expenditure reductions.

POSITIVE OPERATING TREND: Financial margins were positive for the past two years and 2011 year end estimates suggest that this trend will continue. The results were achieved with one-time revenues and deferment of certain pension costs.

ADEQUATE MANAGERIAL PRACTICES: Management's financial planning and review tools have helped contain discretionary cost growth and achieve recent positive operations.

MANAGEABLE LONG-TERM LIABILITIES: The county's credit profile benefits from a manageable debt burden and rapid amortization as well as reasonable pension and other post-employment benefit (OPEB) costs.

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 county legislature and the tax cap legislation does not exempt outstanding ULTGO debt service

CREDIT PROFILE

UPSTATE NEW YORK ECONOMIC CENTER

Monroe County's status as one of upstate New York's key economic centers and third largest population center in the state continues to serve as a credit strength. The county's economy has diversified away from its historically manufacturing-dominated economy and is now home to a robust healthcare and higher education presence, with the University of Rochester and its associated medical center as the county's leading employer.

Other leading employers include Wegmans Food Markets, Xerox Corporation, and Paychex, Inc., with each employing in excess of 3,500 people. Eastman Kodak Company, which in 2011 employed 7,100, filed for Chapter 11 bankruptcy protection in January 2012, an evolving situation which Fitch will monitor for economic and financial effects on the county's credit quality. While Fitch remains concerned about the long-term impact on the regional economy, historic workforce contractions at Eastman Kodak have been absorbed; Eastman Kodak employment totaled 62,000 in the 1980s.

Unemployment within the county continues to moderate, down slightly to 7.1% in December 2011 from 7.5% the year prior, underpinned by both employment and labor force growth. Further, unemployment rates were below state (8%) and national (8.3%) averages. The county's per capita money income and median household income are both 99% of national averages.

The county's historical population out-migration trend appears to have moderated and shows early signs of reversal, with marginal population growth of 1.2% over the past decade. The county's housing market did not experience a boom or bust through the past economic cycle, resulting in continued assessed valuation growth albeit at a nominal pace the last several years including a 0.7% increase in 2012.

REVENUE DIVERSITY

The county's revenues are derived from diverse sources, with property tax (29%), sales tax (33%), and state (17%) and federal aid (14%) comprising the majority of 2010 revenues. However, a majority of the sales tax is a pass-through to the state and underlying municipalities. The county has experienced some budgetary volatility in 2009 and 2010 driven by state aid reductions and delays in payments as well as economic volatility of the county's sales tax.

The county's finances are further characterized by high fixed costs, characteristic of many New York counties; use of one-time sources for operations. Additionally, Fitch anticipates that growth in the tax base will be the only source of property tax revenue growth because of management's commitment to a static tax rate; the rate remains unchanged from the 2008 levy.

SLIM OPERATING MARGIN TREND

The county outperformed its budget and contributed to fund balance in 2010. Results would have been effectively break-even if the county had paid its full pension liability. This performance continued the prior year's trend operations, resulting in a total fund balance of $12.2 million (1% of general fund spending and transfers out) and the county's first unreserved fund balance since 2005. While the unreserved fund balance was a nominal $89,000 (less than 0.1% of general fund spending), this result was achieved despite state aid reductions and delays and a static tax rate.

2011 operations appear to continue this trend, with the county's third quarter financial report estimating a range of results from approximately break-even to a surplus of $4.2 million (0.3% of spending). Management indicated favorable results carried through year-end, but did not provide publicly available documentation. Positive operations are attributable to a strong rebound in sales tax collection, up 5.6% from year-on-year, and positive cost containment.

LIQUIDITY REMAINS DEPENDENT ON BORROWING

The county's liquidity levels are low but considerably more robust at year end of 2010 than reported in the general fund because the county manages its cash on a pooled cash basis. Year-end is typically a low-point in the county's liquidity due to the timing of tax collections. Monroe County's cash flow borrowing needs remain consistent with historic trends at $75 million, which has been stable over the past four years and is down from prior more elevated levels.

PROJECTED STRUCTURAL DEFICIT

The 2012 budget maintains the county's current property tax rate and incorporates approximately $2 million in current year savings anticipated through a 42-FTE reduction in staff. The budget continues the county's use of one-time revenues for operations, anticipating $33.5 million (4.8% of general fund spending) from the sale of property tax liens and county-owned buildings.

Fitch believes the county could experience some negative budgetary variances due to continued state aid cuts and potential delays in its asset sales. The county's multi-year budget forecast anticipates a combined $106 million structural gap for 2013 and 2014. While the forecast is based on conservative assumptions and thus the county may realize better actual results, Fitch will continue to monitor the county's ongoing structural solutions to address its deficits.

MANAGEABLE LONG-TERM LIABILITIES

The county's debt profile is a credit positive, with moderate overall net debt per capita of $2,036 and 3.9% of market value. Amortization is rapid, with 85% retired in 10 years. Debt service remains a manageable portion of the county's spending at 5.7% of the 2012 general fund budget.

The county's six-year capital improvement plan contemplates approximately $370 million in improvements and a manageable $80 million in biennial bonding commencing in June 2012. Management expects that the balance of capital needs will be funded through excess operating revenues from county enterprise funds as well as federal, state, and district funds.

The county participates in state-run cost-sharing defined benefit pension plans which are well-funded under the aggregate cost valuation method. The 2012 budget pension payment represents a low 2.5% of general fund spending. Nevertheless, the county is participating in the state pension payment amortization plan in 2010 and 2011 and may continue to do so.

The county's OPEB liability does not represent near-term financial pressure, as pay-as-you-go funding represented a small 1.6% of spending. The unfunded actuarial liability represented a low 1.2% of market value.

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 Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from CreditScope, 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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