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Fitch Downgrades St. Paul Port Authority, MN's (State Lease) Bonds to 'AA'; Outlook Stable.

NEW YORK -- Fitch Ratings downgrades the rating on the following St. Paul Port Authority, MN bonds to 'AA' from 'AA+' as part of its continuous surveillance effort:

--St. Paul Port Authority (State of Minnesota Office Building) lease revenue bonds.

The Rating Outlook is Stable.

KEY RATING DRIVERS

--Bond payments require state legislative appropriation, resulting in a rating one notch below the state's 'AA+' general obligation (GO) rating.

--The downgrade to 'AA' reflects the July 2011 downgrade of the state of Minnesota's GO debt rating.

--Minnesota's economy is balanced, closely resembling the nation's.

--The state's debt position is strong, with a debt burden that is on the low end of the moderate range at about 2.7% of personal income and rapid amortization. The state has conservative debt policies.

--Minnesota's revenue structure is subject to volatility, and finances are pressured by a large responsibility for local units.

SECURITY

The bonds are secured by lease rental payments by the state, subject to biennial legislative appropriation.

CREDIT PROFILE

Proceeds of the bonds, which were sold in 2002 and 2003, funded construction of two office buildings and related parking facilities in the capitol area. The projects were authorized by the legislature, in conjunction with a GO authorization to develop a related laboratory facility adjacent to one of the buildings as part of a comprehensive plan for locating state agencies as well as a capitol area master plan. The office buildings are separate projects with separate indentures, lease agreements and appropriations, although the payment source is the same, the state's general fund. The provisions in the documents are also nearly the same. Lease purchase financing, rather than general obligation bonding, was undertaken because of legislative GO debt limits.

For more information on the State of Minnesota, please see Fitch Research 'Fitch Downgrades Minnesota GOs to 'AA+'; Outlook Stable' dated July 7, 2011.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria', dated Aug. 15, 2011;

--'U.S. State Government Tax-Supported Rating Criteria', dated Aug. 15, 2011.

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898

U.S. State Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648897

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.
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Publication:Business Wire
Geographic Code:1U2NY
Date:Aug 23, 2011
Words:578
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