Correction - Fitch Rates Queen Creek, Arizona's $53.9MM Improvement District 1 Bonds 'BBB'.

AUSTIN, Texas -- This is a correction for a release issued on Sept. 11, 2006. It corrects the name of one of the development companies in the 5th paragraph.

Fitch has assigned an 'BBB' rating to the Town of Queen Creek, Arizona Improvement District No. 1 (the district) $53.9 million improvement bonds (the bonds). The bonds are scheduled to be sold via negotiation the week of Sept. 25, 2006 through RBC Capital Markets. The Rating Outlook is Stable.

The bonds will be secured and payable only from a special fund established by the town that will contain special assessments imposed by the town on real property located with the boundaries of the district. Bond proceeds will be used to finance the construction of various infrastructure improvements within the district (streets, drainage, railroad facility relocation, water and wastewater, lighting, landscaping, irrigation) and to pay capitalized interest and issuance costs.

The 'BBB' rating reflects the overall sound financial profile of the town and its obligation to make up any assessment shortfalls from the general fund. General fund reserves presently are very healthy and likely would be sufficient to make debt payments in the event of a delay in the disposal of delinquent property due to a bankruptcy filing. The normal foreclosure process for delinquent properties is rapid. Offsetting credit factors include a significant concentration of ownership of developable property within the district, the limited development to date on the major tracts within the district, and the sizeable increase in the town's debt burden that results from this offering.

The district was formed to facilitate the construction of street improvements in Queen Creek and concurrently encourage commercial and residential development within the district. Queen Creek is located in southeast Maricopa County, approximately 40 miles from downtown Phoenix. Given recent population growth both in the town and in surrounding communities, traffic congestion has worsened significantly. The project includes of a new loop for Ellsworth Road that will bypass downtown Queen Creek, improvements to Rittenhouse Road, and a railroad underpass beneath an existing Union Pacific rail route. These improvements are intended to both improve traffic flow and encourage new retail and residential construction along the new roadways.

Vestar Development Co. and WDP Partners are developing the two large tracts within the district. The Vestar tract ultimately is scheduled to contain one million square feet of retail space, while the WDP tract is slated for a 375,000 square-foot mixed use development. Development of these two tracts is in the early stages. In addition, the city owns property within the district that is planned for a new library and a new municipal complex. The assessment percentages for the town, Vestar and WDP presently are approximately 42.0%, 40.0% and 8.5%, respectively. Queen Creek plans to pay its share of assessments from a recently instituted 2% sales tax on new construction in the town.

Assessments are due each Dec. 1 and June 1 (for the Jan. 1 and July 1 debt payments, respectively). The town is obligated to make up any assessment delinquency on or before Dec. 31 and June 30 by making a loan from the general fund to the special fund. The development agreements between the town and Vestar and WDP call for annual reimbursements to the developers for infrastructure costs through rebates of a portion of sales tax revenues generated at retail outlets located on their properties. The town will withhold from these reimbursements amounts equal to the next semiannual assessment installment due.

The foreclosure process on delinquent properties is prompt and considered by Fitch to be a positive credit factor. Delinquent property is subject to public auction no later than 45 days following a missed payment; in practice, taxpayers are given 60-90 days to correct the delinquency. If there is no other purchaser, the town is required either to purchase the property or make the delinquent assessment installment to cover debt service. The annual assessments represent a first lien on the property equal with the lien for general taxes; these liens are senior to any mortgage lien on the property.

The town's financial profile is healthy; Fitch views the city's sizeable reserves as another positive consideration. Unreserved, undesignated general fund reserves at fiscal 2005 year-end totaled $12.7 million, or nearly 110% of spending and transfers out. Preliminary fiscal 2006 results suggest a sizeable operating surplus of $6.5 million, but reserve levels are expected to decline marginally due to transfers out for transportation capital projects. Sales tax revenues are the largest operating revenue source, which generates a measure of vulnerability to changing economic conditions. However, growth in receipts continues to be healthy, with a more than 30% jump expected for fiscal 2006 (excluding the recently added 2% construction sales tax). This increase follows a more than 65% gain in fiscal 2005.

The town's debt burden has increased substantially with this offering. Direct debt per capita and as a percentage of current market value are well above average at $4,651 and 5.9%, respectively. Debt repayment on the town's outstanding excise tax debt is slow at less than 30% retired in ten years. Future capital needs likewise are sizeable--the city's five-year capital needs total $264 million, with streets ($112 million), water and wastewater ($46 million) and parks ($45 million) being the largest components.

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.