Fitch Rates $5MM Vermont GO's `AA+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 12, 2001

Fitch rates 'AA+' the state of Vermont's $5 million general obligation bonds (Vermont citizen bonds), 2001 series B and affirms the 'AA+' rating on $503.4 million outstanding general obligation bonds.

The new bonds, expected the week of Dec. 17 through negotiation with Salomon Smith Barney, will be due August 1, 2002-11 and are not callable.

Vermont's conservative approach to debt and financial operations provides a strong foundation for high credit quality. During the protracted recession period of the early 1990's, the state assiduously followed an austere recovery program, demonstrating well its willingness to take appropriate action for stability. Since recovery, its reserves have been fully funded, expenditure levels remain under control and substantial surplus has been used for capital purposes, allowing debt to decline. With economic slowing, growth prospects have been lowered, leading to downward revisions of estimated revenues. Compensating areas for savings have been identified and use of the general fund stabilization reserve is not expected at this time.

Vermont's economy stabilized in 1993 and has shown moderate growth subsequently, with employment increasing annually and unemployment very low, at 2.9% in October. The state economy relies on manufacturing, tourism, and to an ever decreasing extent, agriculture. The manufacturing sector's vulnerability to economic cycles is currently in evidence. Employment is expected now to increase only 0.3% this year and decline by the same amount next year. In October it was unchanged from the level of the same month last year.

Financial operations have been particularly successful in the past few years, creating large operating surpluses. The strength of the personal income tax has been a major factor. Reserves have been built, with balances equal to 5% of revenues in each of the general, transportation and education funds and there are also reserves for human resources programs. As the economy has slowed, revenue prospects have declined. Estimates were lowered in July and, again in November and for five months through November, collections are somewhat above the new estimates but the personal income tax remains weak. Expenditure cuts and rescissions have been identified to cover most of the shortfall but additional adjustments are expected in January when the legislature meets. Use of the stabilization reserves is not contemplated at this time.

Virtually all of Vermont's debt is general obligation, with a rapid rate of amortization. Net tax-supported debt amounts to $516 million, or $847 per capita, 1.3% of full value and 3.1% of personal income, all well within the moderate range. Debt has declined in each of the past four years and recommended authorizations for new borrowing have been lower as well. The Vermont citizen bonds now offered will be mini bonds, in $1,000 denominations.