Fitch Rates Central Brown County Water Auth, WI, Wtr Revs 'AA'.

CHICAGO -- Fitch Ratings assigns an 'AA' rating to Central Brown County Water Authority (the Authority), Wisconsin's approximately $136,560,000 water system revenue bonds, series 2005. The Rating Outlook is Stable. The bonds are scheduled for negotiated sale on or about June 14 through a syndicate led by UBS Financial Services Inc. The bonds are secured by the net revenues of the water system. Proceeds will finance the acquisition, construction and equipping of the Authority's water transmission project; the purchase of the Authority's non-assignable capacity in water production, treatment and storage facilities owned and operated by Manitowoc Public Utilities (MPU project); retire $4.7 million of bond anticipation notes issued in February 2004 to finance engineering and design work; and fund the water system debt service reserve fund. The Authority will capitalize interest for the transmission line construction period; as currently structured, principal payments commence in 2008.

The 'AA' rating is based on the high underlying credit quality of the member municipalities and the strength of their water purchase contractual obligations with the Authority, which are irrevocable and unconditional. Under the unconditional, joint and several take-or-pay water purchase contract, the six member communities that make up the Authority are obligated to purchase a minimum requirement of wholesale water. If revenues prove insufficient, the member communities must make additional contributions that are subject to annual appropriation. Contractual obligations will exist until Jan. 1, 2040 or as long as bonds are outstanding (final maturity of the current offering is projected to be 2035).

Created in 1998 for the sole purpose of developing and financing a joint wholesale water system, the Authority's plan provides a reliable and cost-effective method of delivering water to municipalities whose own sources are becoming insufficient and are declining in quality. Most member communities are under consent decrees mandating substantial upgrades to current systems or the procurement of high-quality water from another source. The Authority researched a variety of potential solutions before deciding to purchase wholesale water from nearby Manitowoc, solving the member communities' long-term water supply issues.

The six member communities that make up the Authority are the city of DePere (general obligation bonds rated 'AA' by Fitch); the villages of Allouez, Bellevue, and Howard; the town of Lawrence; and Legeview Sanitary District No. 2. DePere will be the largest wholesale purchaser of water, representing approximately 44% of the authority's total water. Wealth indicators for all member municipalities are above state averages. Financially, each member maintains total general fund reserves of at least 30% of spending.

The Authority will set its member rates based on water purchased from Manitowoc (whose contract rate is approved through 2009), other operation and maintenance costs, fixed costs (including the payment of debt service and capital costs), and security fund deposits. Each member's share of debt service is payable to the Authority one year in advance.

If a charter member cannot make its payment under the contract, debt service may be drawn from the security fund; if that proves insufficient, debt service may be drawn from other charter members' security funds per the joint and several nature of the water purchase contract. The non-delinquent customers would then replenish the security accounts, equal to two months' debt service, and make additional payments, subject to annual appropriation. No member can opt out of the contractual obligation during the initial term of the contract, and agrees to purchase a minimum amount of water annually. Should the Authority decide to admit new members, excess capacity and development charges will be assessed and fixed costs will be allocated accordingly.

The project involves an expansion of the Manitowoc plant and the construction of transmission lines to transport water to the charter members. Approximately $24 million of the current offering will finance increased treatment capacity at the Manitowoc facility to accommodate the needs of the Authority. The transmission system will consist of one 30-mile long, 48-inch diameter main and a 35-mile long spoke transmission main, all with a maximum daily capacity of 35 million gallons. While the Authority may issue additional debt to finance expansion the project financed by this offering should meet the needs of existing members through 2030.

Fitch's rating definitions are available on the agency's free of charge web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the free site for seven days.