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

NEW YORK -- Fitch Ratings assigns an underlying 'A+' rating to Idaho State Building Authority's approximately $10,955,000 state building revenue bonds, series 2005A (Eastern Idaho Technical College project) to be negotiated on Aug. 25 through Lehman Brothers. The bonds are due Sept. 1, 2007-2027 with other details yet to be determined. The rating is an underlying rating as the bonds are expected to be insured by Financial Guaranty Insurance Company.

The rating is based on the credit of the state. 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 10 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.

The project is for a health education classroom to be constructed for the Idaho Falls campus of the Eastern Idaho Technical College. The rentals are to begin in the state's fiscal 2008 budget and are not dependent upon completion of the facility. The authority is the only issuer of state tax-supported, long-term debt, and the facilities financed are for broad state purposes. Tax-supported debt, amounting to approximately $213 million with this issue, presents only a very minor burden of 0.7% of personal income.

While the Idaho economy has traditionally depended on natural resources, expansion in the past decade centered on high technology electronics and services. With the industrywide downturn and resulting employment losses prevalent in that sector, overall employment did not decline in contrast to that of the U.S. Employment growth has since exceeded the U.S. growth, gaining 2.6% in 2004 with June 2005 employment up 2.8% from one year ago. State estimates for 2005 employment have been elevated to 2.5%. Moderate employment gains are expected through 2007. The computer and electronics sector is stabilizing but remains vulnerable to additional layoffs.

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 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 a temporary 1% sales tax increase along with a permanent increase in the cigarette tax. The general fund closed fiscal 2004 with an unobligated ending balance of $100.2 million, bolstered by the sales tax increase and unbudgeted federal fiscal aid. Continued economic and revenue improvement in fiscal 2005 replenished balances to sizable levels, resulting in a general fund ending balance of $211 million, well above earlier projections. General fund revenues rose 8.1% from that of the prior year. The improved fiscal position enabled the temporary 1% sales tax increase to expire as planned on June 30, 2005 as well as provide for a one-time 1% temporary salary increase for state employees. Stronger gains in personal income and personal income tax receipts are projected for fiscal 2006.

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