Fitch Rates Indianapolis-Marion County Public Library, IN $25MM GOs 'AAA'.

CHICAGO -- Fitch Ratings has assigned an 'AAA' rating to the Indianapolis-Marion County Public Library, Indiana's (the library) $25 million general obligation bonds, series 2006, scheduled for competitive sale on Aug. 16 with H.J. Umbaugh and Associates serving as the library's financial adviser. The Rating Outlook is Stable. Proceeds will finance a portion of the library's central library expansion project. The bonds are general obligations, payable from ad valorem taxes levied on all taxable property within the library district. Fitch also affirms the 'AAA' rating on the library's $85.5 million of outstanding general obligation debt.

The 'AAA' rating reflects the library's strong and diverse economic base, consistent financial performance, and extremely low direct debt levels. The library has minimal operating risks, with past changes in financial position related to the internal funding of capital expenses. Financial reserves are good in the context of these risks and are enhanced by the financial support of a separately managed private foundation, which complements the library's community service. Although construction of the central library experienced delays in 2004, which increased final costs, construction resumed in July 2005. Proceeds from this issue and a proposed issue of approximately $20 million in early 2007 will provide the additional funds necessary to assure the central library's planned opening in 2007.

The library serves all of Marion County, except for the City of Beech Grove and the Town of Speedway, which have their own libraries. The library's circulation has grown at an average of 4.4% annually over the past decade. Despite the library's interim location, 2005 circulation grew 4.3% from the previous year with continued growth expected in 2006. The Hennen American Library Rating Index, which measures levels of circulation, materials, staffing, reference usage, service and expenditures per capita, recently rated the library sixth nationally among libraries serving a population of more than 500,000. Library board appointments reflect the library's close ties with area governments.

Marion County ranks as the state's largest county in terms of both population and economic output. As of June 2006, the county's unemployment rate equaled 5.3%, compared with a 5.1% rate for the state and a 4.8% rate for the nation. Recent building activity indicates continued economic strength, as countywide building permit values have averaged more than $1.9 billion annually since 1996 and underpinned a 4.7% annual growth rate in the library's tax base.

The library's financial position reflects its limited operating risks. General fund revenues have increased 3.5% annually since 1995, with most of the growth attributable to gains in property tax receipts. Increased operational efficiencies and reduced operating support of capital projects held expenditure growth to 2.4% annually over the same period. Although the general fund experienced a shortfall in 2003, which reduced the ending balance to $3.8 million (10.6% of spending), continued spending restraints in 2004 and 2005 elevated the ending balance to $7.8 million (24.5%) in 2005.

Continued personnel reductions and other cost-cutting efforts should lead to near balanced results for 2006. The library's financial position is expected to remain strong and management is committed to further operating efficiencies without a service impact.

The library's debt levels represent a comparatively low $132 per capita and 0.3% of market value, reflecting the library's historical use of operating funds to finance capital projects. The central library project has received support from the Lily Endowment ($25 million) and the Library Foundation ($20 million), which together represent 44% of the original project cost. Overall debt equals $3,645 per capita and 7.6% of market value.

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