Fitch Affirms Philadelphia Housing Auth CFP Revs at 'AA'.

NEW YORK -- Fitch Ratings affirms the long-term rating of 'AA' on the outstanding Philadelphia Housing Authority's (PHA) capital fund program revenue bonds, series A of 2002 and the outstanding Redevelopment Authority of the City of Philadelphia (RDA) capital fund program revenue bonds, series B of 2002 and series C and D of 2003. The bonds are insured by Financial Security Assurance Inc. whose Insurer Financial Strength is rated 'AAA' by Fitch.

The bonds are limited obligations of the PHA and RDA, supported by annual appropriations of the U.S. government administered through the U.S. Department of Housing and Urban Development's (HUD) Capital Fund Program (CFP). The CFP is the HUD funding mechanism for allocating modernization and rehabilitation subsidies to public housing authorities. The bond proceeds were used, and are being used, to fund demolition, reconstruction and rehabilitation of public housing developments in the city of Philadelphia. The bonds are not a liability of, nor are they guaranteed by the U.S. government or HUD. All pledged subsidies are subject to available annual appropriations, are not guaranteed, and are subject to changes in law or HUD regulations.

The rating reflects the strong source of revenues (funded by the U.S. government) for debt service payments while recognizing the risks associated with the potential volatility in the amount, timing, and authority's share of annual HUD appropriations, all of which are directly dependent upon the federal budget process and the formulas for allocating capital improvement funds among all public housing authorities. Concerns over these appropriation risks are mitigated by the long history of federal support for public housing, the high level of stressed projected debt service coverage (minimum of 4.5 times [x] each year throughout the life of the bonds), and the adequate reserve requirements. The rating also reflects the approvals and agreements HUD has made with the authority to ensure that available appropriations are made directly to the trustee, on a first-priority basis, to make debt service payments on the bonds regardless of the rehabilitation program's progress or PHA's managerial and financial performance.

Over the past five years, capital funds appropriations to the PHA have averaged approximately $74 million annually. HUD has agreed to continue the capital funding from available appropriations from any successor program to the CFP if it is not renewed or extended in its current form. The amount of modernization subsidies that PHA receives will be determined under CFP or the funding mechanism for allocating modernization and rehabilitation subsidies in place at that time.

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.