Fitch rates Milford, Connecticut's 2006 GOs 'AA', GO BANs 'F1+'.

NEW YORK -- Fitch rates Milford, CT's $7.1 million general obligation (GO) bonds, issue of 2006 'AA', $3.425 million GO bond anticipation notes (BANs) lot A 'F1+', $2.95 million BANs lot B 'F1+', and $13.675 million BANs lot C 'F1+'. The bonds and BANs are scheduled for competitive sale on October 24. The bonds mature serially Nov. 1 2007-2026, with semiannual interest payments on May 1 and Nov. 1, commencing on May 1, 2007. The bond anticipation notes (BANs) lot A mature on Nov. 2, 2007, lot B mature on May 4, 2007, and lot C mature on Feb. 1, 2007. In addition, Fitch affirms the 'AA' rating on the county's approximately $61.4 million outstanding GO bonds. The Rating Outlook is Stable.

Milford's 'AA' general obligation bond rating is based on the city's consistently strong fiscal performance and adequate reserves, manageable debt levels, and above-average economic indicators. Slow growth in state aid and increases in personnel costs continue to pressure the city's operating position, though this is mitigated by solid financial management and prudent budgeting.

Located almost equidistant from Bridgeport and New Haven on Long Island Sound, Milford is a midsize city in New Haven County with an estimated 2005 population of 53,045. Bic Corp.'s relocation of its headquarters to an adjacent city will reduce the number of jobs in Milford considerably, but the actual impact on employment appears to be modest, as the relocated jobs continue to be held by Milford residents commuting to the adjacent city. The city should also benefit from an expected influx of vendors to augment its already strong retail economy. The city's 4.4% unemployment rate for 2005 was below state and national levels. Per capita income is on par with the state's high level and is well above the national average.

Milford's fiscal performance has shown resilience across economic cycles and recent declines in state aid. Preliminary results for fiscal 2006 indicate a fourth consecutive general fund operating surplus despite having budgeted the use of $3 million of beginning balance. Better than expected results are attributable to conservative budgeting, expenditure control policies, and better than expected revenues. A PILOT's agreement with the city's top taxpayer, Milford Power Company LLC, not only resolves a prolonged assessment appeal but also affords the city a certain degree of revenue protection and predictability over the long term. Fiscal 2005 unreserved and undesignated general fund balance equaled 7.1% of total expenditures and transfers out, exceeding management's goal of 5%-6%. The adopted budget for fiscal 2007 is balanced.

At nearly $2,000 per capita, or 1.9% of estimated full value, debt levels are low to moderate, though these numbers account for BANs offered in the current issue that are not likely to become long-term debt. Debt service claims an affordable 6.0% of general fund spending despite a rapid principal amortization of 73% in ten years. Future capital needs focus mainly on school and sewer improvements and total a manageable $71.7 million through fiscal 2011. In addition, a $64.5 million wastewater upgrade project is currently underway, with the majority of the funding provided by state revolving fund loans. The city expects to issue about $6 million of bonds annually to meet these needs, which is affordable given their rapid amortization and favorable debt levels.

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