Fitch Rates Cicero, New York's $2.9MM GO Bonds 'BBB'.

NEW YORK -- Fitch assigns a 'BBB' rating to the Town of Cicero, New York's (the town) approximately $2.9 million public improvement (serial) bonds, 2006. The bonds are scheduled for competitive sale on July 18; proceeds will be used to fund road construction projects. The Rating Outlook is Stable.

The below-average 'BBB' rating, despite generally sound underlying credit characteristics, primarily reflects a decision by the town in 2004 to not appropriate for a lease payment which it had committed to under bonds sold by a conduit issuer. Credit strengths include a sound financial position, increasing residential and commercial development opportunities due to its proximity to the Syracuse, NY metro area, good transportation links, and low debt levels.

In 2001 the Cicero Local Development Corporation (CLDC) issued $15.9 million in lease revenue bonds to fund a recreation center. The project was expected to be self-supporting, but ultimate security for the bonds was a pledge by the town to make lease payments in an amount equal to debt service to the CLDC, subject to annual appropriation. Actual project performance did not meet expectations and the town was called upon to cover the shortfall in 2003. The following year, the town did not appropriate the lease payment in the budget and the CLDC property was sold to private owners in 2005. The unwillingness to make the lease payment for the CLDC bonds, while not legally obligated, is a key credit concern. The three town council members that supported the decision to enter into the agreement with the CLDC no longer sit on the town board.

Cicero is located in Onondaga County in central New York. The local economy is stable but somewhat limited, and a majority of residents commute to jobs in nearby Syracuse. The town benefits from its location on Oneida Lake, with eight miles of lakefront property, much of which is currently underdeveloped. Home prices have risen approximately 24% since 2002, but residential property in the town remains affordable compared to other property in the Finger Lakes region, which has spurred development. The residential unemployment rate has historically been below state and national averages, and income levels are average compared to state and national levels.

Growth in the town's full market value of property has averaged a robust 9.6% annually over the past four years, including a 15% increase that benefited the town in 2006. Both residential and commercial development contributed to the gains. In 2005 a Lowes Home Center and Wal-Mart opened in the town, and plans for a Target retail store have been approved. Given the town's good access to transportation links, including close proximity to several major highways, and its growing residential population, the prospects for continued commercial development appear bright.

The town is not legally required to have an independent financial audit prepared. Financial results are based on unaudited reports examined by the Office of the State Comptroller, which does not offer the same level of scrutiny as an independent financial audit prepared by a certified public accounting firm. As reported in the state reports, Cicero's financial condition is currently strong, characterized by ample reserves and liquidity in all of its major, tax-supported operating funds. Unreserved general fund balance of $3.2 million for the four tax-supporting operating funds in fiscal 2005 represented 34% of the funds' cumulative spending and transfers out. Although reserve levels are currently high, the town plans to draw the general fund balance down to 15% of spending. Town officials are currently developing a multi-year plan for the use of the balance, and in addition are formulating a fund balance reserve policy. Fitch anticipates that the plan will direct excess fund balance to be used for one-time expenses, rather than to offset property tax increases.

Debt levels are currently low at .2% of market value and $100 per capita. Overall debt includes the debt of Onondaga County (GO bonds rated 'AA+' by Fitch) and the town's four school districts and totals a higher 1.85% of market value and $920 per capita. The town does not currently have a multi-year capital improvement plan (CIP), but is working to develop one. The magnitude of the capital projects included in the CIP is expected to be manageable.

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