Fitch Rates Altamonte Springs, Florida $11.1MM Wtr & Swr Rfdg Revs 'AA-'.

Business Editors and High Tech Writers

NEW YORK--(BUSINESS WIRE)--Oct. 11, 2002

Fitch Ratings assigns an underlying 'AA-' rating to Altamonte Springs, Florida's (the city) approximately $11,105,000 water and sewer system refunding revenue bonds, series 2002. The bonds, expected to be insured, are to be priced through negotiation with William R. Hough on or about Oct. 23. The bonds mature from Oct. 1, 2003-2008. Bond proceeds will be used to refund all of the city's water and sewer system revenue refunding bonds, series 1992. After this issuance, there will be no outstanding parity debt.

The 'AA-' rating reflects the system's strong financial position and debt service coverage; low debt levels with a fast payout rate; stable service area with above-average wealth levels; ample water supply and excess capacity at treatment facilities; and sound legal provisions. The rating also reflects the system's aging infrastructure, which will require increased maintenance costs going forward, and rates that are slightly above average.

The City of Altamonte Springs is located in southwest Seminole County, 7 miles north of downtown Orlando. The city's population increased 17% in the last decade to reach 41,200 in 2000. Altamonte Springs is primarily a residential community with some retail, and income levels are above average. City unemployment rates are below those of the county, state and nation. While many residents of the city commute to nearby Orlando, the county has a strong economic base of its own, with high tech manufacturers and corporate headquarters, such as the Automobile Association of America, located in the county.

The utility system provides water service to about 11,372 customers in and around the city. Raw water comes from eight Floridan acquifer supply wells and requires only conventional treatment. This supply far exceeds daily demand. The sewer system provides retail service to about 10,068 customers, and wholesale service to three municipalities, three private utilities, and Seminole County. Revenues from wholesale service contracts only compose 8% of system operating revenues. One wastewater treatment plant provides ample capacity and includes a reclaimed water system. Treatment facilities are reportedly in good condition, although aging infrastructure will necessitate increased capital spending.

Financial operations are strong, generating solid debt service coverage. The system has over 600 days of cash on hand, and pledged revenues have covered debt service by at least 4.3 times (x) over the past four years. While there are no formal financial projections, system officials expect coverage to remain at historical levels going forward. Very high coverage levels are in part due to additional system funds needed to make an annual transfer of about $2 million to the city's general fund. The system's debt levels are low and all debt outstanding after this issue will be retired by fiscal 2008, adding additional financial flexibility.

System officials expect slow customer growth over the next several years, so additional capacity needs are modest. The fiscal years 2003-2006 capital improvement plan, totaling $30 million, identifies needs but does not identify specific funding sources, although all projects are expected to be pay-as-you-go funded. The system has historically funded repair and replacement upkeep in the amount of depreciation, and expects to continue this conservative practice going forward. Retail rates are somewhat higher than regional and national averages, and annual rate increases in the moderate 2%-3% are planned over the next several years.