Fitch Rates Bernalillo Cnty, New Mexico TRANs 'F1+'.

AUSTIN, Texas -- Fitch assigns a rating of 'F1+' to Bernalillo County (the county), New Mexico's $30 million tax and revenue anticipation notes (TRANs), series 2006A, which are scheduled to sell via Internet auction on Dec. 7. Fitch also affirms its 'AA+' rating on the county's outstanding $92 million general obligation (GO) bonds and 'AA' rating on $183 milion outstanding gross receipts tax (GRT) bonds. The Rating Outlook on the county's bonds is Stable.

The TRANs are payable from the general revenues of the county collected during the 2007 fiscal year. TRAN proceeds will be used to fund a portion of the county's cash flow management needs. Spectrum Capital Group is serving as the county financial advisor.

The 'F1+' rating, Fitch's highest for short-term debt, is based on Bernalillo County's long-term credit strengths, adequate note coverage by broadly pledged revenues, and substantial year-end cash balances. Credit fundamentals include favorable financial reserves, conservative financial management, an extensive and growing economy and tax base, and modest debt position. The county's new role as sole operator of the Metropolitan Detention Center (MDC) substantially increased its public safety expenditures. Imposition of a new dedicated GRT and a short-term financial agreement with the City of Albuquerque (GOs rated 'AA' by Fitch) should allow the county to preserve its strong financial position. The recent enactment of this and other GRTs makes the county more dependent on economically sensitive GRTs; however, the maintenance of sizeable reserves and available property taxing margin offsets this risk.

Short-term needs stem from the county's reliance on property taxes for 40% of its general fund revenues, the bulk of which are collected in December and May. The county historically issues TRANs twice a year. This note borrowing is $5 million less than this summer's TRAN par amount, but both are substantially larger than past borrowings which typically total $20 million every six months. The notable increase is due to the county's complete takeover of the MDC, previously jointly funded by the county and the City of Albuquerque. The current offering plus the $30 million in outstanding TRANs represent a moderate 32% of pledged revenues projected for fiscal 2007, up notably from last year's 24% level. Future TRAN borrowings are expected to decline to historical levels.

The fiscal 2007 projected ending cash balance totals about $85 million, which represents a strong 39% of total general fund disbursements. Furthermore, the projection conservatively assumes GRT revenues grow by a modest 3.0%, about half the actual rate in fiscal 2006. Typically large year-end cash balances enhance the county's ability to make full and timely repayment. By ordinance, the county is required to deposit 40% and 60% of TRAN principal par amount into the TRAN debt service fund in April and May, respectively, ahead of its late-June payment date.

Pledged revenues are broad and include property taxes, GRT revenues, charges for services, licenses and permits, and other general fund revenues. Based on the recent increase in note borrowing, note repayment coverage (for this offering plus this summer's series 2006 $35 million TRAN issuance) by pledged revenues in fiscal 2007 is projected to total 3.1 times (x), less than pre-fiscal 2007 coverage levels of about 4.0x; taxes collected in April through June alone, after the series 2006 TRANs have been redeemed, are projected to provide a strong 2.1x coverage, but is also below historical coverage levels of about 3.0x.

The county's long-term credit fundamentals remain strong. The 'AA+' GO debt rating reflects the county's sound financial management and large financial reserves, diversfied and growing tax base, modest debt levels, and above-average pay-out rate. The county's role as New Mexico's principal population center has resulted in steady GRT revenue growth even during recent recessionary periods. For more information on Bernalillo County, please refer to Fitch's rating action commentary dated Nov. 2, 2006.

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.