Fitch Ratings assigns an 'AA+' rating to the following general obligation (GO) bonds of Queen Anne's County, Maryland (the county):

--$14,020,000 public facilities bonds of 2016;

--$8,870,000 public facilities refunding bonds of 2016.

The proceeds of the public facilities bonds will be used to finance various county capital projects. Proceeds of the public facilities refunding bonds will be used to refund the county's outstanding public facilities bonds of 2006 for debt service savings. The bonds will be offered by the county through a competitive sale on February 15.

In addition, Fitch affirms the following ratings:

--$121.2 million GO bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations of the county, backed by its full faith and credit and unlimited tax pledge.

KEY RATING DRIVERS

STRONG FINANCIAL POSITION: The county's general fund operating performance has been adequate, reflecting realistic revenue forecasting and expenditure controls. Reserves are maintained at a prudent level and the county retains very strong revenue controls and expenditure flexibility.

STRONG ECONOMIC CHARACTERISTICS: The county benefits from its close proximity to both Baltimore and Washington D.C. Key economic and demographic factors (including employment, wealth indicators, and educational attainment) consistently exceed the state and nation.

DEBT TO REMAIN AFFORDABLE: Overall debt levels are moderately low and should remain so given the county's limited future borrowing plans and commitment to conservative debt policies. Carrying costs for debt, pension, and other post-employment benefits (OPEB) are also low and are expected to remain stable.

RATING SENSITIVITIES

FISCAL MANAGEMENT: The rating is sensitive to management's ability to continue to maintain solid financial position and stable operations with recurring budget solutions. The Stable Outlook reflects Fitch's view that such shifts are not expected.

CREDIT PROFILE

Queen Anne's County is located on the eastern terminus of the Chesapeake Bay Bridge, directly across the bay from Anne Arundel County. Population growth has been strong, increasing 20% since 2000 to an estimated 48,804 as of 2014.

POSITIVE OPERATIONS CONTINUE

A combination of spending cuts, conservative budgeting and revenue enhancements reversed the negative operating trends experienced during the recession, returning the county to positive operations over the last four years. The fiscal 2015 net operating surplus after transfers was $2.8 million, equivalent to 2.4% of spending. The county's unrestricted general fund balance at fiscal year-end 2015 was $11.8 million or 10% of spending. The restricted portion of the general fund balance includes a rainy day fund totaling $8.7 million, boosting the county's available resources to a solid 17.5% of spending. The county reinstated its 7% rainy day reserve in fiscal 2013, and Fitch expects the county will maintain this reserve requirement in effect going forward.

Property taxes represent approximately 54% of general fund revenue. Fitch views the county's regionally competitive property tax rate as an important measure of financial flexibility given its dominance as a source of general fund revenues. There are no statutory restrictions on property tax growth. Income taxes represent roughly 36% of general fund revenues. In fiscal 2012 the county raised the income tax rate to the maximum level of 3.2%.

The fiscal 2016 budget was balanced without the use of fund balance or any revenue enhancements. The budget represents a 4.5% increase in spending over the 2015 budget. Year-to-date fiscal 2016 operating performance shows an estimated surplus of $1.8 million due to under-spending the budget.

ECONOMY LINKED TO BALTIMORE-WASHINGTON MARKET

The county benefits from its proximity to Baltimore and Washington D.C., with approximately 84% of the labor force commuting to jobs outside of the county. The county's unemployment rate, 4.5% as of November 2015, has consistently ranked below those of the region, state and nation. Wealth levels are above national averages.

As of fiscal 2015, the county has allocated a portion of its existing transfer, recordation and hotel tax to fund economic development programs. To date, the $2.9 million in projects is projected to create and retain 245 jobs.

FAVORABLE DEBT PROFILE

Debt levels are moderately low at 1.9% of market value and $2,609 per capita. Debt levels should remain affordable given the county's manageable capital needs, and adopted debt policies limiting GO debt to a moderate 2.5% of county TAV and $3,000 per capita.

The general capital plan for fiscal years 2016-2021 totals $102.6 million, with maintenance upgrades to emergency equipment, a new courthouse, and school renovations representing most of the plan. Bond proceeds represent roughly $62 million of the program financing, which would not materially alter the county's debt profile.

The county contributes to the State of Maryland Employees Retirement and Pension System and makes all annually required contributions. Pension contributions consume a low 1.7% of total governmental spending in fiscal 2015.

The funding for the state's pension obligations for state employees has begun to improve after a decade of weakening that resulted from an actuarial contribution methodology now being phased out and market losses in the last downturn. Under new GASB pension accounting requirements the state is reporting higher ratios of assets to liabilities. As of June 30, 2014, assets to liabilities measured 69.5% using Fitch's more conservative 7% discount rate assumption (compared to the 7.65% used by the system in 2014); the employees plan would be funded at 64.9%. The Fitch-adjusted net pension liability attributed to the county is estimated at $23.1 million or a very low 0.2% of market value.

Additionally, the county has created an OPEB trust and expects to fully fund the OPEB actuarial required contribution (ARC) by 2023. The county funded 18.1% of the OPEB ARC in fiscal 2014. Carrying costs for debt service, pension (including teachers' pension costs) and OPEB totaled a low 13.9% of governmental spending in fiscal 2014.

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

Fitch recently published an exposure draft of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated Sept. 10, 2015). The draft includes a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to less than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published by the end of the first quarter of 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. Fitch anticipates the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date.

In addition to the sources of information identified in the applicable criteria specified below, this action was informed by information from CreditScope, IHS Global Insight, and Zillow Group {add or subtract as needed}.

Applicable Criteria

Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869942

Tax-Supported Rating Criteria (pub. 14 Aug 2012)

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

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

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998252

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998252

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.