Correction: Fitch Rates Napa-Vallejo Waste Mgt Auth, CA Rev Bonds 'A-'.

Business Editors

AUSTIN, Texas--(BUSINESS WIRE)--June 15, 2004

(This is an amended version of a press release originally issued on May 21, 2004. The issuer has modified the proposed rate and bond covenants for the 2004 bonds, and those changes are reflected in this amended release.)

Fitch Ratings assigns an 'A-' rating to the Napa-Vallejo Waste Management Authority, California's (the authority) $9.84 million 2004 revenue refunding bonds (solid waste transfer facility project). The 2004 bonds are scheduled to sell the week of June 21 through Piper Jaffray & Co.

The 2004 bonds are special obligations of the authority, payable from net revenues derived from the operation of a solid waste transfer facility located in Napa County, California (the facility). Bond proceeds will be used to refund the outstanding 1994 revenue bonds for debt service savings, and pay costs of issuance. The Rating Outlook is Stable.

The 'A-' rating reflects the authority's substantial cash reserves, reduced landfill closure liability, minimal capital needs, and increasing tonnage amounts processed at the facility. Also incorporated into the rating is a string of operating losses over the past several years, as the authority has attempted to reduce large cash reserve amounts. Provision for a supplemental reserve, as well as existing reserves, should limit the potential for interruption of revenues in case of a bankruptcy filing by a private disposal company.

Moderate operating losses have occurred in four of the past five fiscal years. Authority officials report that these losses were planned to reduce sizable operating reserves. For fiscal 2003, the $7.8 million reported in net income resulted from a $9.6 million adjustment in estimated landfill closure and postclosure costs; otherwise the authority would have posted a net loss of $1.8 million. Unrestricted cash and investments totaled $3.5 million in fiscal 2003, down from $7 million the prior year.

Authority operations occur primarily at the facility, which serves four area governments and individual haulers. Trash that is collected at the facility is transported by truck to a landfill located in nearby Contra Costa County. Operation and maintenance of the facility is performed by Allied Waste, Inc., a private disposal company. The authority also owns a landfill that became inactive in 1995. Final closure operations of the landfill are expected to be completed in 2005, at which time more than $4.5 million in restricted trust funds will be available for other purposes. Fitch believes that these additional funds should enable the authority to remain competitive with other area disposal facilities.

The primary contractual customers of the facility are Napa County and the cities of Napa, Vallejo, and American Canyon. These customers combined accounted for roughly 60% of total waste volume in fiscal 2003, down from 75% in fiscal 1996. The remaining volume comes from the spot waste market, which increased from 25% of total tonnage eight years ago to more than 40% today. Authority officials cite the competitive tipping fee of $54 per ton and high transportation costs to other disposal sites as the primary reasons for the growing 'self-haul' volume. Overall, tonnage processed at the facility has increased more than 8% annually since fiscal 1999, including a 16% jump in fiscal 2003.

The primary credit concern is the potential for interruption of revenue streams to the authority if a private disposal company files for bankruptcy protection. With the exception of the City of Napa, private companies collect customer payments on behalf of the contractual customers and remit them to the authority. A supplemental reserve, to be maintained in an amount no less than 1.0 times (x) the succeeding year's debt service requirement, largely mitigates this concern. The proposed rate and bond covenants for the 2004 bonds are identical to the 1994 covenants; both the rate covenant and the additional bonds test require 1.25x coverage.