Fitch Rates District of Columbia's $250MM TRANs 'F1+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 19, 2003

Fitch Ratings has assigned an 'F1+' rating to the District of Columbia's approximately $250 million general obligation tax revenue anticipation notes, fiscal year 2004. The notes will be sold competitively on Nov. 20, and mature Sept. 30, 2004.

The 'F1+' rating on the District of Columbia's tax revenue anticipation notes (TRANs, or notes) reflects sound coverage on the repayment date, satisfactory legal protections for noteholders, and management's demonstrated ability to respond quickly to funding shortfalls and unexpected expenditure needs. Even with a projected decline in cash balances of $202 million during the fiscal year, coverage on the Sept. 30, 2004 repayment date is expected to be 3.4x including required cash reserves.

The notes are general obligations of the district, payable from any source of receipts not otherwise legally committed. The notes are not secured by a special real property tax that is set aside for repayment of general obligation bonds. Special real property taxes make up a projected 48% of property tax receipts and 7% of total available receipts.

The district covenants to levy, maintain, or enact taxes payable during August 1 through Sept. 30, 2004, sufficient to repay the TRANs when due. The district also covenants to deposit funds for TRAN repayment to an escrow fund on the following schedule: 40% of principal on each of Sept. 1 and Sept. 15, and the remaining 20% of principal plus accrued interest on Sept. 30, the maturity date. The Mayor must review cash flow projections before August 16 and Sept. 16 and make adjustments to escrow account deposits if receipts are not expected to cover note repayment.

Note proceeds represent only 4% of expected available fiscal 2004 receipts in the district's operating accounts, which include the general, capital projects and federal and private resources funds. Most sources of receipts are spread fairly evenly throughout the year, but property taxes, which make up 15.8% of projected fiscal 2004 receipts (or 9.3% net of special real property taxes) are due semiannually, on March 31 and Sept. 15. About 14% of fiscal 2004 receipts are expected in September.

The District's 'A-' general obligation bond rating reflects the sound financial cushion the District of Columbia has built up over the past several years. The fiscal 2004 budget includes a general fund drawdown of $147 million or 3.6% of budgeted expenses, but reserves should remain sound and well above legally required cash balances. While the economy is still showing weakness, there is some evidence of stability, and the impact of the economic downturn has not been severe. Debt levels are high and likely to increase given the backlog of deferred capital needs, but legal and policy restrictions should keep debt levels affordable. The Rating Outlook on the long-term bonds is Stable.