Fitch Rts Gwinnett County Water & Sewerage Auth, GA $219MM Revs 'AAA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 29, 2003

Fitch Ratings has assigned a 'AAA' rating to the Gwinnett County Water and Sewerage Authority, Georgia's approximately $19,345,000 refunding revenue bonds, series 2003A, and $200,000,000 revenue bonds, series 2003B. The bonds are scheduled to sell competitively May 14. Series A bonds will refund a portion of series 1993 bonds for present value savings of about 3.5% of refunded par. Series B proceeds will finance a portion of four construction projects: an expansion of the F. Wayne Hill Water Resources Center; the Shoal Creek Filter Plant; a second raw water intake at Lake Lanier; and a discharge pipeline to Lake Lanier. Fitch affirms the 'AAA' rating on $700.9 million in outstanding debt that carries a county general obligation pledge, including bonds issued by the Gwinnett County Water and Sewer Authority and the Development Authority of Gwinnett County. The Rating Outlook is Stable.

The Gwinnett County Water and Sewerage Authority's (the authority) revenue bond rating reflects the security provided by a pledge of the county's full faith and credit and taxing power. The county's general obligations are rated 'AAA'. The bonds are also secured by a pledge of net revenues from the water and sewerage system. The county's high credit fundamentals include strong financial operations, as evidenced by consistently large fund balances, sound management policies, good economic growth and diversity, a low debt burden, and pay-as-you-go financing of capital projects. The effects of the economic slowdown are evident in such indicators as unemployment, sales tax collections, and building permit activity; however there are indications of very recent improvement. Debt service coverage on water and sewerage authority bonds is projected to remain strong despite a large amount of borrowing through 2008.

Like many counties in the Atlanta metropolitan statistical area (MSA), Gwinnett County has seen explosive growth; although the growth slowed somewhat in the 1990s, it has remained robust. The 2002 estimated population is 650,000, a 10% increase from the 2000 census figure. The county's population more than doubled in the 1980s and grew 65% in the 1990s. The economy includes a well diversified mix of manufacturing of traditional and high-technology products, health care, other services, and retail. The county has experienced significant losses in technology sector employment, but the labor force and number of employed residents expanded throughout 2002. The county's unemployment rate is close to the state average and below the nation's. Income levels are well above average.

General government financial operations continue to benefit from strong taxable property growth and county measures to control spending, although decreases in non-property tax revenues and increases in health care costs will necessitate continued vigilance. By policy, governmental operating funds maintain a reserve of at least one-twelfth of budgeted appropriations and funds with debt obligations require a reserve of one-sixth. In addition, the county sets aside one-fourth of the general fund budget as a reserve and maintains a $2 million contingency fund. Tax-supported debt levels are very low, and a majority of capital needs are funded by current revenues, including proceeds of a special local option sales tax and excess revenues of the utility system.

The water and sewerage system provides water service on either a retail or wholesale basis to almost the entire county population and sells wholesale water to some neighboring counties. The system's significant challenge, shared by other water providers in the region, is allocating a limited long-term water supply among a growing number of users. Although a compact involving Georgia, Florida, and Alabama giving municipal and industrial customers priority above other users was formalized by federal legislation in December 1997, the parties have not been able to agree on each state's entitlement to water in two shared basins. Recent progress in the negotiations is encouraging.

A 50-year water and wastewater master plan addresses long-term supply and facility needs in light of anticipated continued strong growth in demand. Construction of additional withdrawal and treatment capacity is under way, and the county will continue to seek increases from the Georgia Department of Natural Resources Environmental Protection Division (EPD) in its allocation to meet demand projections. The county also expects to receive a credit for returning high-quality reclaimed water. The sewerage system's major water reclamation facilities provide advanced wastewater treatment. The newest plant, the F. Wayne Hill Water Resources Center, meets the strictest overall treatment requirements in the Southeast.

Debt service coverage has been robust, at over 2.0 times (x) in each of the past five years (excluding pledged system development charges). Debt service requirements resulting from borrowings for about one-half of the $1.4 billion five-year capital improvement plan (CIP) will cause a decline in coverage to about 1.56x by 2008, or 2.13x with system development charges. The combined water/wastewater bill is above national levels but about average for the Atlanta region.