Fitch Ratings has affirmed the ratings on the following bonds at 'AA':

--$5.7 million Augusta, Georgia (the consolidated government) general obligation (GO) bonds, series 2010;

--$7.9 million solid waste management authority of Augusta, Georgia (the authority) revenue bonds (revenue bonds), series 2010.

The Rating Outlook is Stable.

SECURITY

The GO bonds are a general obligation of the consolidated government, backed by its full faith, credit and unlimited taxing power. The GO bonds are additionally payable by sales tax proceeds received by the consolidated government.

The revenue bonds are special, limited obligations of the authority, payable solely from contract payments from the consolidated government in an amount equal to debt service on the bonds. The consolidated government's obligation to make contract payments is absolute and unconditional, and shall constitute a general obligation of the consolidated government to which its full faith, credit, and taxing power are pledged.

KEY RATING DRIVERS

SOUND RESERVES DESPITE DRAWDOWNS: The 'AA' rating on the GO and revenue bonds reflects the consolidated government's solid financial position, despite drawdowns of reserves over the past two fiscal years, with another deficit projected for fiscal 2014 (fiscal year end of December 31). The unreserved/unrestricted fund balance has generally been maintained at or above 20% of spending.

RECENT MILITARY DEVELOPMENTS A POSITIVE: Fort Gordon, the consolidated government's largest employer, was selected as the new location for the U.S. Army's cyber command headquarters. Employee growth is expected to increase significantly over the next few years, which will favorably impact the region and tax base.

REGIONAL HUB ECONOMY: The economy is a regional hub for healthcare, education, and trade. Economic indicators, including wealth and poverty levels, are weak and unemployment rates remain elevated compared to state and national averages.

MANAGEABLE LONG-TERM LIABILITIES: The consolidated government's debt burden is low and should remain so given no plans for additional issuance. Carrying charges for debt, pension, and other-post employment benefits (OPEB) are affordable.

RATING SENSITIVITIES

MAINTENANCE OF SOUND RESERVES: The rating reflects Fitch's expectation that the consolidated government will continue its practice of sound financial management and maintenance of healthy reserves.

CREDIT PROFILE

Augusta is the formal name given to the consolidated city-county government of Augusta and Richmond County. Augusta is located 155 miles east of Atlanta and 75 miles southwest of Columbia, South Carolina. The consolidated government has a 2013 estimated population of 202,003, which has remained relatively stable since 2000.

RESERVES REMAIN ROBUST DESPITE RECENT DEFICIT OPERATIONS

Since fiscal 2012 the consolidated government has been using its sizeable reserves to offset ongoing spending pressures as well as for several programs that use fund balance appropriations as the funding source. The consolidated government reported deficits in the general fund in both fiscal 2012 and fiscal 2013; however, total general fund reserves remained sound at $31.2 million or approximately 24% of spending at the close of fiscal 2013, a level that eases Fitch's concern about the drawdowns.

At the time of Fitch's last review in November 2012 the preliminary fiscal 2013 budget projected a $4 million shortfall (3% of budgeted spending); with the planned gap stemming from employee pay increases, unfunded and mandated judicial positions, and the loss of one-time revenue sources such as land sales. The actual deficit drawdown was much smaller at $778,321 or 0.6% of spending due to prudent expenditure management and cost cutting measures.

WEATHER EVENT MAY IMPACT 2014 RESULTS

Fiscal 2014 general fund operations have been impacted by a one-time event related to an ice-storm in February 2014, subsequently declared a federal natural disaster. Absent these disaster-related expenditures, management indicates operations have been balanced in fiscal 2014.

Total costs related to the storm amounted to $17 million, and management stated that FEMA has committed to reimburse $11.5 million of these costs, which they expect to receive before year-end (December 31, 2014). Approximately $449,000 has been received to-date. Management is considering appealing an additional $4 million that was denied by FEMA and expects a favorable outcome.

Assuming the FEMA reimbursement is received prior to year-end, management expects to use up to $4 million of general fund balance assigned for risk management purposes to cover expenditures associated with the storm, dropping the total general fund balance to about $27.2 million or roughly 19% of budgeted fiscal 2014 spending, still considered satisfactory by Fitch.

To alleviate the draw on reserves and help balance the budget, management increased the millage rate to 9.79 mills in August 2014 from 8.04 mills the prior year (a 22% increase), which remains three-quarters below the mill cap. The increase in millage generated an additional $7.9 million in revenue, which will be partially allocated to replenish reserves over a four-year period as well as provide funding for general government operations.

Fitch notes that the timing of the FEMA reimbursement could have a significant impact on fiscal 2014 general fund results, with the potential use of reserves in excess of $11 million at year-end. Fitch does not view this as a concern, as the FEMA reimbursement would contribute positively to fiscal 2015 results, boosting reserves to levels closer to historical norms.

BALANCED OPERATIONS FOR FISCAL 2015

The proposed fiscal 2015 budget is balanced without reliance on existing fund balance. The budget assumes flat growth in the tax digest, although management anticipates 1% to 2% growth over the next couple of years, excluding any developments associated with the expansion at Fort Gordon. The fiscal 2015 proposed budget also includes the partial replenishment ($1,125,000) of assigned fund balance for risk management.

REGIONAL HUB ECONOMY

Augusta serves as an economic hub for the regional economy. Leading employers include Fort Gordon, the Richmond County School System, University Hospital, and Augusta-Richmond County. Fort Gordon in particular is a significant economic driver, with over 23,000 employees.

In late 2013, the U.S. Army announced that the Army cyber command headquarters will be located in Fort Gordon, consolidating and coordinating Army cyber and network operations under one commander for the first time in its history. The move is initially expected to bring an additional 3,000 to 4,000 civilian and military employees by 2016, possibly increasing to 10,000 in the future. Management anticipates this development will have a significant impact in housing starts as well as infrastructure needs in the area. Fitch notes potential infrastructure development costs could be significant for the consolidated government over the coming years, and will monitor any developments for its impact on the consolidated government's finances.

Wealth levels remain below average with per capita money income 81% and 73% of the state and nation, respectively, and the poverty rate remains significantly above the state and nation. Unemployment of 9.9% in July 2014 improved year-over-year, but remains elevated compared to both the state (8.3%) and U.S. (6.5%) averages.

MANAGEABLE LONG-TERM LIABILITIES

Overall debt levels are low at $889 per capita and 1.3% of market value. Amortization of principal is above-average, with 65% retired within 10 years. Fitch expects debt levels to remain low based on an absence of additional debt plans.

The capital improvement plan is limited to $184.4 million and is primarily funded by a special purpose local option sales tax (SPLOST) approved by voters in June 2009. SPLOST proceeds provide funds for debt service on all previously issued GO bonds and for pay-as-you-go capital financing. The consolidated government levies the SPLOST up to a dollar limit which generally covers five to six years of collections. The current SPLOST is anticipated to reach its dollar limit in fiscal 2016 and the next SPLOST is scheduled for a voter referendum in November 2015.

The consolidated government participates in a multiple-employer defined benefit pension plan, the Georgia Municipal Employees Benefit System (GMEBS). In addition, the consolidated government maintains five single-employer defined-benefit pension plans (the 1945 plan, the general retirement plan, the policeman's pension plan, the firemen's pension plan, and the city employee's pension plan). All of the pension plans except for the GMEBS plan are closed to new employees. As of Jan.uary 1, 2013, the plans had an aggregate funded ratio of 72%, using a 7% investment rate or return assumption. The unfunded liability on a combined basis of $43.8 million equals a manageable 0.3% of 2013 market value.

OPEB benefits are funded on a pay-as-you-go basis. As of Jan.uary 1, 2013, the unfunded liability of $95.5 million represented a manageable 0.7% of 2013 market value. Overall carrying costs including debt, pension and OPEB liabilities are affordable at 11% of governmental spending in fiscal 2013.

SOLID WASTE MANAGEMENT AUTHORITY DEBT

The authority was created to manage solid waste collection and disposal activities and to pay associated costs from revenue bond proceeds. The consolidated government anticipates that revenues of the solid waste system will be sufficient to pay debt service. Historical results indicated that system revenues would be sufficient to pay debt service on outstanding system debt on the maximum annual debt service; therefore, Fitch has provided self-supporting credit to the authority's debt. Should system revenues prove insufficient, the consolidated government will utilize ad valorem collections to pay debt service on these bonds and certain parity debt.