Fitch Rates Idaho State Building Auth $10.9MM Bond 'A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 14, 2004

Fitch Ratings assigns an 'A+' rating to Idaho State Building Authority's approximately $10,955,000 state building revenue bonds, series 2004A (Eastern Idaho Technical College project) to be negotiated June 23 through Lehman Brothers. The bonds are due September 1, 2006-26 with other details yet to be determined.

The structure of state lease payments provides a sound basis for repayment of the bonds. Authority financings and projects to be leased require specific authorization by the state legislature. Leases renew automatically absent action by the state at least ten months prior to scheduled expiration. A debt service reserve for each project is established at the lesser of maximum debt service, 125% of average annual debt service, or 10% of outstanding principal. Most importantly, lease payments for debt service are required to be made in their entirety within 30 days of the beginning of each fiscal year. All lease rental payments derive from direct state appropriations.

Authority bonds are special obligations, payable from separate rentals for each facility. This project is for a health education classroom for the Idaho Falls campus of the Eastern Idaho Technical College. The source of debt service payments are rentals appropriated directly by the state legislature. The authority is the only issuer of state tax-supported, long-term debt, and the facilities financed are for broad state purposes. The ratings are based on the credit of the state. Tax-supported debt, amounting to approximately $234 million with this issue, presents only a very minor burden of 0.7% of personal income.

While the economy has traditionally depended on natural resources, expansion in the past decade centered around high technology electronics and services. With the industry-wide downturn and resulting employment losses prevalent in that sector, employment growth was affected. Compared with a 3.8% average annual growth rate between 1992-00, employment grew just 1.5% in 2001, was flat in 2002 but rose 0.6% in 2003. In April 2004 the increase was 1.9% from a year ago.

The economic weakness was reflected in revenue and financial performance. A substantial income tax revenue shortfall in fiscal 2002 and continued revenue underperformance required the state to exhaust its fund balances, reduce appropriations, and institute one-time transfers of $193 million in fiscal 2003 into the general fund. The general fund closed June 30, 2003 with a $15.7 million balance. The fiscal 2004 budget effectively replaced the one time measures with a like amount of tax increases, including $170.5 million from a one cent sales tax increase and $22.2 million from an increase in the cigarette tax. Personal income taxes receipts through April 2004 continue to under perform projections but are offset by sales taxes and other revenues, including unbudgeted federal fiscal aid. This is expected to enable the general fund to close with a projected $72.5 million on June 30, 2004. The sales tax measure sunsets on June 30, 2005. In anticipation of fiscal 2006, replacement plans include building upon balances achieved this year and allocating excess revenues toward filling the gap resulting from the sales tax expiration. However, other measures appear to be necessary for on-going balance and trends will be evaluated.