Fitch Rates Lucas County, Ohio's $4.9MM GO BANs 'F1+'; Affirms Outstanding 'AA-', Positive Outlook.

CHICAGO -- Fitch Ratings assigns an 'F1+' rating to Lucas County, Ohio's (the county) $4,915,000 various purpose improvement notes, general obligation (GO) limited tax bond anticipation notes (BANs), series 2006-1, which are scheduled for competitive sale on Sept. 26, 2006. Cabrera Capital Markets, Inc. is serving as financial advisor on the transaction. The notes are payable from ad valorem taxes levied on all taxable property within the county, subject to the state of Ohio's (the state) ten-mill limitation. Proceeds will finance water supply and sanitary sewer improvements in the Lucas County Metropolitan Sewer and Water District in anticipation of the collection of special assessments; equip the county recorder's office with an electronic document conversion system; and fund improvements to county buildings. Fitch also affirms the 'AA-' rating and Positive Rating Outlook on the county's approximately $58 million of outstanding GO debt.

The county has experienced a stable economy, steady financial performance and position, and low debt levels, demonstrating adequate flexibility under the ten-mill unvoted debt limitation. The Positive Outlook reflects increased economic diversification, consistently strong financial performance, and declining debt levels. An expanding service sector has diversified the economy over the past decade, reducing the influence of manufacturing and prompting an increased level of both private and public investment within the county. The resultant gains in property and sales tax receipts, combined with management's conservative budgeting practices, led to improved overall financial performance and strengthened reserves. Furthermore, the county's use of a portion of its annual operating surplus for capital purposes enhances its financial flexibility, minimizes its external borrowing, and maintains its low direct debt levels.

Located in the northwestern corner of Ohio at the Michigan border, Lucas County ranks as the sixth largest county in the state in terms of both population and total personal income. The county's economy, historically dominated by manufacturing, has diversified, led by gains in the health care, business service, and engineering service industries. Large employers in Lucas County include ProMedica Health Systems (11,500 employees), Mercy Health Partners (6,799 employees), Bowling Green State University (5,400 employees), and DaimlerChrysler AG (3,548 employees). Though diversification strengthened the local economy, national declines in manufacturing have pushed the unemployment rate up from a low of 4.5% in 2000 to 7.7% in July 2006. This rate is slightly above the metropolitan area average of 7.4% in the same period.

Increases in both commercial and residential investment led to a 4.8% annual gain in property values since 1995. The county's tax base is well diversified as the 10 largest taxpayers represent 5.0% of total assessed valuation. The county expects continued development as DaimlerChrysler AG increased its investment in local facilities and the University of Toledo and the Medical University of Ohio merged effective July 1, 2006, while downtown Toledo continues to draw increased development near the Mud Hens stadium. County per capita income approximates the state average and equals 95% of national figures.

The county may invest in an 8,000-10,000 seat arena to host minor hockey league games, concerts, and community events, with a total project cost of about $82 million, to be financed primarily through revenue bonds. Although the issue would require state and county legislative support, the county experienced success with the county-funded minor league Toledo Mud Hens baseball stadium.

Growth in property and sales tax receipts, combined with management's conservative budgeting practices, has strengthened the county's financial position. Consistent financial performance produced unreserved general fund balances in excess of 25% of spending in the past five years, despite declines in revenue sharing and a slight decline in sales tax receipts in 2003 (Dec. 31 year-end). In 2004 and 2005, renewed sales tax growth and strengthening investment income boosted total general fund revenues while spending was kept flat. As a result, the county's $2.4 million 2005 general fund surplus brought total reserves to 28.7% of expenditures and transfers, up from 18.4% in 1996. The 2006 budget anticipates a small shortfall in the general fund. Evidencing a significant degree of financial flexibility since 2001, the county has invested about $21 million of its operating income in capital projects through transfers from its general fund.

The county's modest capital plan and extensive internal resources result in a low direct debt burden equal to $203 per capita and 0.3% of full market value. A large share of direct debt is reimbursed by special assessment payments. Overall debt is $1,382 per capita and 2.3% of full market value. Although the county once considered borrowing to build a new jail facility, current plans have changed to a more modest renovation of the existing facility.

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