Amendment: Fitch Rates Babylon, New York Series 2006 Bonds 'A'; Upgrades Outstanding GOs to 'A'.

NEW YORK -- (This is an amended version of a press release issued Nov. 22, 2006 that contains updated information on the expected sale date of the bonds as well as updated information in the third paragraph.)

Fitch Ratings assigns an 'A' rating to the Town of Babylon, NY's $15.8 million public improvement serial bonds, series 2006. The bonds are anticipated to price competitively late December 2006 or early January 2007. Bond proceeds will be used to fund various general government capital projects. Also at this time Fitch upgrades to 'A' from 'A-' the rating on the town's approximately $149 million outstanding GO bonds. The Rating Outlook is Stable.

The upgrade to 'A' reflects the town's improved financial position as reported in four consecutive unqualified audits, as well as its diversified economic base, low debt levels and manageable capital needs. While the town experienced significant delays in producing its 2002 and 2003 audits, the 2004 and 2005 audits were released in a timely manner and show a continued trend of enhanced liquidity and reserves across all tax-supported funds. The town has shown a willingness to raise recurring revenues to cure deficits in the highway fund and continues to budget conservatively.

Also incorporated in the rating is the stagnant performance of assessed valuation and a growing dependence on mortgage tax receipts. The town is the defendant in lawsuits filed by hundreds of town property owners since 1995, seeking reimbursement of garbage district assessments paid since 1994. The cases are in the discovery stage and the possibility exists that the outcome may have a significant financial impact on the town.

Located in Suffolk County (GO bonds rated 'AA-' by Fitch), the town's economic profile continues to exhibit strength. The 2000 census recorded population growth of 4.4% during the 1990s; the unemployment rate has historically been below that of the state and nation, and this trend continued in 2005 when the town's 4.7% rate was below the 5.0% and 5.1% posted by the state and nation respectively. The composition of Babylon's employment has diversified away from its once concentrated defense-manufacturing base; further development along Route 110, in collaboration with the neighboring Town of Huntington, is ongoing, as the towns are recruiting biotechnology firms to the area. Wealth levels are below those of the county and state and slightly above national levels.

Babylon's financial position has shown substantial improvement since the beginning of the decade. Fiscal 2005 results show an unreserved fund balance in the four major tax-supported operating funds equal to 27.3% of spending, up from 3.5% at the close of 2002. Following the sale of deficit funding bonds in 1999, a qualified audit opinion in 2001 regarding inter-fund transfers, and late audits for 2002 and 2003, the timely delivery of the 2004 and 2005 audits represents the town's return to standard financial disclosure practices. The fiscal 2005 audit is the fourth consecutive audit with a clean opinion, and financial flexibility is at an all-time high across tax-supported funds. Fiscal 2006 results anticipate small operating surpluses in all major operating funds except the highway fund, which is expected to post a small deficit. A 19.8% increase in the highway fund tax levy is budgeted in 2007 to achieve structural balance in the fund. The 2007 budget for the major operating funds shows a 5.6% increase in spending over 2006 budgeted levels.

The town's direct debt levels are low at $779 per capita and 0.66% of market value. Overall debt levels are more moderate at approximately $1,954 per capita and 1.66% of market value including debt of the county, school district, and other overlapping entities. Currently, 81% of the town's outstanding debt is retired within the next 10 years, reflecting rapid amortization. Capital needs from 2006-2011 focus on road and park improvements and are manageable, totaling $78.5 million. While GO bonds are expected to fund the majority of the plan, debt levels should remain modest as the town adheres to a policy to retire more debt than it issues each year.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.