Fitch Rts Eco Devel Auth of James City Cty, VA's $96MM Lease Revs 'AA-'; Positive; GOs 'AA+'; Stble.

NEW YORK -- Fitch rates the Economic Development Authority of James City County, Virginia's approximately $96 million Lease Revenue Bonds, Series 2006, 'AA-' with a Positive Rating Outlook and also rates James City County, VA's (the county) approximately $21 million General Obligation (GO) Bonds, Series 2006, 'AA+' with a Stable Rating Outlook. The lease revenue bonds and GO bonds are scheduled to sell competitively on Dec. 12 and 13, 2006 respectively, with semi-annual interest due on each December 15 and June 15 commencing on June 15, 2007. The lease revenue bonds are secured by lease payments, subject to appropriation, made by James City County, acting as agent for the James City County School Board, to the Economic Development Authority of James City County. Fitch also affirms the 'AA+' rating on the county's approximately $103.2 million outstanding general obligation bonds and the 'AA-' on the EDAJCC's approximately $22.6 million Lease Revenue Bonds, Series 2005. The Rating Outlook for both securities is Stable.

The 'AA-' rating on the lease revenue bonds reflects the strong overall credit quality of James City County and the requirement to make rental payments on the leased property, subject to appropriation. The county has excellent financial management, sizable fund balances, moderate debt levels with above-average amortization, an affordable capital plan, and above average wealth and income levels. Bond proceeds will fund construction of three schools, all of which will eventually become part of the security for the bonds. Currently, the lease only includes one of the three properties for construction, posing some risk to bondholders. This is mitigated by the county's need to identify sites and construct schools to avoid overcrowding as well as the segregation of bond proceeds associated with the sites until they become part of the lease. The positive outlook indicates Fitch's expectation that the two other schools will become part of the leased assets adding to bondholder security. Once leased assets have increased, Fitch expects the rating will be upgraded.

James City County is located in southeastern Virginia, equidistant from Richmond and Norfolk, and has a 2005 population of approximately 57,525 according to the US Census. The county economy is driven in part by tourism and the County is either home to or nearby a number of American heritage tourist attractions such as Colonial Williamsburg, the Yorktown Battlefield, and the Jamestown Colony. In 2007 the County will also host the 400th anniversary celebration of the Jamestown settlement. Other attractions include the Busch Gardens amusement park and the Kingsmill golf course, home to annual LPGA events. The economy is diversifying as evidenced by major expansions to the Anheuser-Busch bottling plant and Wal-Mart distribution center. Wealth levels are high with per capita income equal to 112% and 123% of the state and nation respectively and market value per capita approximately $131,689. 2005 unemployment is well below state and national averages, continuing a long-standing trend for the county.

The county's financial position is strong, characterized by ample reserve and liquidity levels. Unaudited fiscal 2006 numbers show a $5.2 million operating surplus in the general fund that increased unreserved fund balance to 29.5% of expenditures and transfers out. Positive operating results were driven by improved tax collections, strong AV growth, and above-budget growth in both the sales and meals taxes. The 2007 budget is balanced and expenditure and revenue growth assumptions appear to be conservative.

The county is experiencing significant population growth, which has augmented capital needs as reflected in rising debt levels. However, debt levels should decrease since amortization is rapid at 65% in 10 years and the county only plans a modest amount of debt issuance over the next five years and no further school construction issuances until 2016, depending on the pace of development. Overall debt levels are moderate at about 3.4% of market value and $4,483 per capita.

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