Fitch Rates Romulus, Michigan's $25.5MM GOs & TIFA GOs 'A'.

CHICAGO -- Fitch Ratings assigns an 'A' rating to the following issues:

--Romulus, Michigan's $7 million capital improvement bonds, limited tax general obligation (LTGO), series 2006, and

--Tax Increment Finance Authority (TIFA) of the City of Romulus, Michigan's $18.5 million tax increment recreation center bonds (LTGO), series 2006.

The bonds are scheduled for negotiated sale on or about May 23 through a syndicate led by NatCity Investments, Inc. The city's LTGO bonds are secured by the city's full faith and credit pledge, subject to applicable constitutional, statutory, and charter limitations, although the city intends to pay debt service from revenues derived from its water supply and sewage disposal system. The TIFA bonds are secured by and issued in anticipation of the collection of future tax increment revenues captured within the development area; the city of Romulus also pledges its LTGO to TIFA bond repayment. As such, both bond series represent LTGOs of the city of Romulus. Proceeds of the TIFA LTGO bonds will finance the construction and equipping of a new recreation center, while the city's LTGO bonds will finance improvements to the city's water supply and sewage disposal system. The Rating Outlook is Stable. Fitch also withdraws the 'A' rating on the TIFA's series 1994 bonds, as the bonds were fully defeased.

The rating is based on the city's mature development near Detroit Metropolitan Wayne County Airport (DTW), steadily growing tax base, and consistent financial performance. The rating also reflects moderate tax base exposure to the auto manufacturing industry through the presence of General Motors Corp. and several automotive suppliers. Although the city's overall debt levels are moderately high on a per capita basis, rapid debt amortization and limited capital needs point to a declining debt burden over time.

Located in the southwestern portion of Wayne County, the city of Romulus is a mature suburb that includes DTW. The city's 2004 estimated population of 23,609 has remained stable since 1970. The city's affordable housing and attractive location near the employment base of the Detroit metropolitan area has spurred steady tax base growth averaging 6.7% since 2000. Although income levels are slightly below state and national averages, the city's valuable property tax parcels, reflecting the presence of General Motors Corp. and a hotel corridor catering to airport passengers, have appreciated over time and market values per capita are well above average.

Romulus uses its TIFA to promote commercial development within city limits; the TIFA district encompasses approximately 40% of the city's taxable valuation and TIFA valuation grew 7% annually since 1995. The increment derived from the TIFA's taxable valuation has itself grown almost 25% on average annually since 1995, and reflects a seasoned district with relatively diverse leading taxpayers. Debt service coverage on the current TIFA issuance is projected to average a healthy 3.3 times (x) through 2027 and employs reasonable assumptions regarding tax base growth. The TIFA may issue additional bonds against this increment, but coverage should remain strong given rapid tax base expansion.

Throughout most of the past decade, Romulus achieved steady financial performance despite reduced state-shared revenue. In fiscal 2005 (June 30 year-end), total general fund balance equaled $2.9 million or 15.3% of spending, compared to $2.5 million (13.5%) in 2003. The city's limited service responsibilities, primarily the provision of public safety and investment in road improvements, restrain expenditure growth to wage and benefit increases. Although fiscal 2006 preliminary results indicate a modest shortfall in the general fund, balances will remain adequate. The city is currently looking to improve revenues through increased oversight of fines and has constrained spending through the reduction of positions by attrition. Nonetheless, wage and benefit growth, including pension and retiree health care costs, will remain a challenge to long-term financial performance.

Romulus' moderate direct debt, including TIFA issuance, equals $2,872 per capita or 2.1% of market value. Overall debt is moderately high with per capita debt equal to $6,615 or 4.8% of market value. The city has addressed the majority of its capital needs and its debt burden will decline over time, given rapid amortization of 85% of principal repaid over 10 years. The TIFA may issue up to $14 million for roadway improvements and $5.5 million for a new fire station in the next year, which would carry the city's LTGO pledge.

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