Cook County, Illinois Upgraded To `AA' By Fitch.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 8, 2001

Fitch has raised Cook County, IL's (the county) general obligation rating to `AA' from `AA-`, and assigned the rating to the county's $355,510,000 general obligation bonds, series 2001A. The rating change affects $1.9 billion of outstanding debt. The upgrade reflects continued improved financial performance and reduced spending pressures, achieved through better operational management, and the prospects of diminished capital needs. While the county's primary responsibilities in criminal justice and healthcare are considerable and financially burdensome, the administration has limited growth of programmatic costs and staffing levels. General fund spending, after growing 10.7% annually between fiscal 1987 and 1993, slowed to 4.7% annually through fiscal 1999. Against county personal income, county spending grew from 0.42% in 1987 to 0.57% in 1993 and stabilized through 1999 at .55%. Budgeted personnel levels, which grew from 22.7 thousand in 1987 to 27.6 thousand in 1995, declined to 26.8 thousand by 2001.

The series 2001A bonds are expected to sell through a negotiated underwriting led by Lehman Brothers and Banc One Capital Markets on Feb. 14. The bonds, which are secured by the county's unlimited ad valorem taxes, will refund $110.5 million of outstanding series 1996 variable rate demand bonds. The balance of bond proceeds will finance equipment purchases, additional construction costs for the new Cook County Hospital and various capital improvements in county buildings. Dated Feb. 1, the bonds will pay interest each May 15 and Nov. 15, beginning May 15, 2001, and mature Nov. 15, 2006-2031.

Continued spending restraint and a strong economy combined to improve the county's financial performance. Governmental fund balances (general, special revenue and debt service) have increased to $484.6 million in fiscal 1999 (30.7% of spending), from $82.2 million in fiscal 1993 (7.8%). In the general fund, balances grew to $166.6 million (17.8% of general fund spending) in fiscal 1999, from a deficit of $87 million (negative 12.3%) in fiscal 1993. Fiscal 2000 results (Nov. 30 year-end) are expected by Fitch to demonstrate continued strength and better- than-expected budgetary performance. Also, the county's defined- benefit pension plan is fully funded.

Although Cook County's direct debt burden is low -- $430 per capita and 0.8% of property values - overall debt is moderate at $2,540 per capita and 4.6% of property values. After remaining stable through the early 1990s, the overall debt has increased with debt issuance primarily by the Chicago Board of Education and the suburban municipalities.

With the completion of several detention facilities and the nearly 75% completion of the new Cook County Hospital, the county's capital needs have declined from expectations of several years ago. The cost of the new 464-bed replacement hospital under a guaranteed fixed-price contract is budgeted for $380 million through completion in 2002, although construction is ahead of schedule. Better facility organization, reduced maintenance costs and declining needs for inpatient service capacity are expected to compensate for additional financing expense. Beyond the hospital, the county's remaining capital needs are a modest addition of court facilities. The county has made progress in reducing overcrowding conditions in jails by adding capacity to detention facilities and developing alternative programs to incarceration. Consequently, inmate populations have been stable in recent years.

Cook County, with a population of 5.2 million, is the most populous in Illinois, and in personal income terms represents 46% of the state economy. Per capita income is 7% above the state average and 17% above the U.S. average. While growing at a similar pace to the state, the county has shifted more towards service industries from durable manufacturing and more closely matched U.S. industry distribution. Employment growth has averaged 0.5% annually since 1990 as unemployment rates, and tracking state patterns, declined to 4.6% in December 2000, from the previous peak of 8.0% in 1993.