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HOUSTON (TX) TRANs RATED 'F-1+/F-1+' BY FITCH -- FITCH FINANCIAL WIRE --

HOUSTON (TX) TRANs RATED 'F-1+/F-1+' BY FITCH -- FITCH FINANCIAL WIRE --
 NEW YORK, July 2 /PRNewswire/ -- Houston (Texas)'s $95 million variable rate demand tax and revenue anticipation notes Series 1992D are rated "F-1+/F-1+" by Fitch. The notes were offered in a weekly interest rate mode yesterday by a syndicate led by Smith Barney.
 The two parts of this rating reflect the city's ability to pay the notes at their June 29, 1993, maturity, and the ability of Morgan Guaranty Trust Co. of New York (rated "AAA/F-1+" by Fitch) to purchase unremarketed tendered notes. Although the city's projected cash flow for fiscal 1993 is weaker than in prior years, the availability of a projected $20.9 million in borrowable resources assures timely note repayment. Also, the city's intent to segregate funds to provide for the note repayment primarily in April adds flexibility in the event of a cash shortfall in the last few months of the fiscal year.
 The borrowable funds and the early set-aside are very important to the rating this year because the projected cash flow is based on several proposed budget balancing actions for fiscal 1993, and the final budget and cash flow may vary from the current estimates. Also, revenue projections may be optimistic if the national and local economy do not recover as expected. Historically, the city has responded in a financially prudent manner to economic downturns, though the current recession has contributed to fund balance reductions.
 The city's need for tax and revenue anticipation notes results from its reliance on property taxes, which provide nearly half of general fund operating revenue, and the timing of property tax receipts, which are concentrated in the latter half of the fiscal year. As in the past, the city is borrowing the minimum amount necessary to cover the projected cash flow deficit. The borrowing for fiscal 1993 is larger than in recent years because of fund balance reductions in prior years.
 Also, another borrowing of about $20 million is likely later in the year. Historically, these second borrowings have been done through banks and repaid within a few months. While there are no legal provisions requiring the city to set aside funds needed to repay the note principal and interest prior to their coming due, the city intends to segregate funds three times prior to June, with the bulk of the note repayment set aside in April. The set-aside coverage is strong at 2.0 times (x) that month.
 -0- 7/2/92
 /CONTACT: Amy S. Doppelt, 212-908-0514, or Richard J. Raphael, 212-908-0506, both of Fitch/ CO: City of Houston ST: Texas IN: SU: RTG


GK -- NY037 -- 6168 07/02/92 12:27 EDT
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Date:Jul 2, 1992
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