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VERMONT $45 MILLION GENERAL OBLIGATION REFUNDING BONDS RATED 'AA' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, Sept. 24 /PRNewswire/ -- Vermont's $44.97 million General Obligation Refunding Bonds, 1993 Series A, expected during the week of Sept. 27 through negotiation with a syndicate led by Lehman Brothers, are rated 'AA' by Fitch. Vermont's $339 million outstanding 'AA' general obligations are affirmed and the credit trend remains stable. The new bonds will be due Feb. 1, 1995-2012 and will be callable beginning Feb. 1, 2003, at 102 percent.
 Vermont's conservative approach to debt and financial operations provides the foundation for its high credit quality. Debt ratios are moderate and nearly all debt is general obligation, scheduled to be retired at a rapid rate. Currently, tax-supported net debt is equal to about 3.6 percent of personal income and the ratio would rise to 4.5 percent if the state's deficit and planned borrowing were included.
 Vermont's economy grew quickly in the 1980s, but the recession cut deeply into estimated revenues and financial problems have continued to plague the state as a result of a longer and more severe downturn than had been anticipated. A deficit of about $65 million was funded in 1991 through issuance of notes and a plan was developed to restore financial balance through a combination of temporary tax increases and expenditure cuts. Although the state has adhered to the plan and the notes were retired on schedule in 1993, a deficit of about $24 million remains.
 The present plan is to retire the remaining deficit from operations this year and to start to rebuild fund balance. With the exception of the sales tax, other temporary tax increases are expected to revert, in accordance with the original plan. The sales tax rate was allowed to drop to 4 percent from 5 percent on July 1, but the higher rate was reinstated Sept. 1 after results for 1992-93 were known.
 While employment loss in Vermont, at 5 percent, is only about half that suffered by most other New England states, there has been no growth since the decline stabilized. As economic recovery is likely to be slow, financial vulnerability in the form of revenue shortfalls remains, especially since tax collections for the first two months of the current fiscal year have been disappointing.
 Despite the state's inability to realize its ambitious financial plan fully, the characteristic response of tax increases and expenditure cuts are a strong credit feature.
 -0- 9/24/93
 /CONTACT: Claire G. Cohen of Fitch, 212-908-0552/


CO: ST: Vermont, New York IN: SU: RTG

WB -- NY046 -- 5403 09/24/93 12:10 EDT
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Publication:PR Newswire
Date:Sep 24, 1993
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