Fitch Rates Hillsborough County, FL Solid Waste Rfdg Rev 'A'; Outlook Stable.

NEW YORK -- Fitch Ratings assigns an underlying 'A' rating to Hillsborough County, Florida's approximately $43,980,000 solid waste and resource recovery refunding revenue bonds, series 2004. Scheduled for competitive sale the week of Aug. 23, the bonds are expected to be insured by an 'AAA' rated bond insurer. Bond proceeds will be used to refund the outstanding 1994 revenue bonds for debt service savings, terminate a forward interest rate swaption agreement, and pay costs of issuance. The Rating Outlook is Stable.

The 'A' rating reflects the system's strong financial performance and liquidity position supported by the legal and economic flow control of waste to the county-owned solid waste management system. Additional credit strengths stem from the stability of the system's revenue structure, satisfactory debt service coverage levels, and the fundamental economic growth of the service area. These factors help mitigate somewhat the liberal legal provisions, risks associated with the franchise contracts, and the planned and increasing capital needs related to the system's expansion over the medium term.

The bonds are payable from net revenues derived from system operation. The system has consistently generated operating surpluses since the mid 1990s. Driven by customer growth and active cost control measures, preliminary results indicate another operating surplus for fiscal 2004. Close to half of the system's revenues are derived from special assessments on properties receiving residential collection and disposal services within the service area. Assessments are included on the property tax bills and constitute a lien on property. Collection rates are high at approximately 99%. Approximately 26% of system revenues are derived from tipping fees remitted to the county by three franchise haulers serving commercial and industrial customers. Fitch recognizes the potential interruption in revenue flows associated with this payment mechanism, as well as the expiration of current contracts in September 2005. These concerns are somewhat mitigated by the system's sizable cash and investments balances and the ostensibly satisfactory operating history and contractual relationship with the franchisees. Other revenue sources include sales of electricity to Tampa Electric Company (rated 'BBB+' by Fitch) and charges for services through interlocal agreements with the cities of Tampa and Temple Terrace. Revenues from these sources, which account for approximately 24% of system revenues, provide a degree of stability as the terms of the sales contract and inter-local agreements extend beyond the final maturity of the bonds.

The Hillsborough County solid waste management system is a division of the county (whose general obligation bonds are rated 'AA+' by Fitch), managing the daily solid waste collection and disposal of close to one million tons per year of municipal solid waste. The county-owned and fully integrated system includes one existing landfill, an adjacent landfill capacity expansion, two solid waste transfer stations, one resource recovery facility, and a number of collection and processing centers. The 1,200-tons per day resource recovery facility, operated by Covanta Hillsborough Inc. (a subsidiary of Danielson Holding Company), is near capacity, and considerations for the expansion of the facility and the extension of the operation and maintenance contract with the operator are currently under way. Despite the increased capital expenditures projected over the medium term, the system should continue to enjoy financial flexibility, highlighted by its stable financial performance and strong cash and investments position.