Fitch Rates Akron, Ohio's $2.4MM GOs 'AA-'.

NEW YORK -- Fitch Ratings assigns an 'AA-' rating to Akron, Ohio's (the city) $2,375,000 street improvement special assessment bonds, series 2005. The bonds are scheduled to price the week of Sept. 19 in a negotiated underwriting led by SBK-Brooks Investment Corp. The Rating Outlook is Stable. The bonds are secured by the collection of special assessments; to the extent these are insufficient, the bonds are also secured by the city's levy of ad valorem property taxes within the 10.5 mill limitation imposed by city charter. Proceeds will finance various capital improvements. Fitch also affirms the 'AA-' rating on the city's outstanding general obligation debt.

Akron's general obligation 'AA-' rating reflects its moderate debt burden, stable financial position, and diversifying economy. The city's economy continues its transition from being largely manufacturing based to one with more diversity. Numerous redevelopment projects bode well for continued economic success and growth, and recent economic gains have increased Akron's income tax and user fee revenues.

Akron, the county seat of Summit County in northeastern Ohio, is a mature city located approximately 35 miles south of Cleveland. The city's economic and employment base is shifting from its manufacturing origins, primarily rubber and tire products, to a more diverse balance with an increased service sector. While Goodyear Tire & Rubber Co. remains one of the top employers with about 3,500 workers, the employment base has diversified and residential employment increased 1.1% annually since 1991.

Services -- particularly in health, financial, and legal areas -- and trade have led the gains. In particular, Summa Health System (6,100 employees) and Akron General Medical Center (3,670) have increased their local presence and expanded hiring in recent years. Service-sector growth has offset substantial employment losses, primarily in manufacturing, during the 1980s and early 1990s. Akron's unemployment rate equaled 6.2% in July 2005, compared with Summit County and Ohio's 5.4% in the same period.

Akron's financial operations remain stable, with the unreserved general fund balance exceeding $8 million or 6% of spending in each of the past six years. Income taxes, which provided 53% of general fund revenue in fiscal 2003 (Dec. 31 year-end), grew at a steady average 2.4% annually since 1998. As a result of income tax growth and spending restraint, the city's total general fund balance increased to $14.4 million (11.1% of expenditures and transfers out) in fiscal 2003, from 2001's $10.9 million (7.9%). Although preliminary 2004 general fund results indicate a very small shortfall due to flat income tax revenue growth, the city will remain within its fund balance target of 10%-15% of revenues. Additionally, year-to-date 2005 income tax collections are 17% above 2004 performance.

Akron's debt load is above average but manageable since it allocates 27% of income tax revenue for capital purposes by city charter and uses joint economic development districts (JEDDs) to share the costs of utility improvements with neighboring townships. The city's direct debt burden equals a moderately high $2,232 per capita and 5.0% of full property value. Overall debt equals $2,461 per capita and 5.5% of full property value.

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