Fitch Rates $144MM Ohio Building Authority Bonds 'AA'

Business Wire, April 26, 2004

Business Editors

NEW YORK--(BUSINESS WIRE)--April 26, 2004

Fitch Ratings assigns the rating of 'AA' to approximately $144.1 million Ohio Building Authority state facilities bonds, consisting of:

-- $75.0 million state facilities bonds (administrative building

fund projects), 2004 series A,

-- $22.6 million state facilities refunding bonds (Vern Riffe

Center), 2004 series A,

-- $3.8 million state facilities refunding bonds (DNR Fountain

Square Project), 2004 series A, and

-- $42.6 million state facilities refunding bonds (adult

correctional building fund projects), 2004 series B.

The bonds will sell through negotiation with a syndicate led by Bear, Stearns & Co. Inc. during the week of April 26. The refunding bonds are expected to result in level savings for the state of 3.3% of refunded par on a present value basis.

Ohio finances many state projects through bonds secured by biennially appropriated payments under lease agreements. The 'AA' ratings on these and other bonds backed by the state's lease appropriations reflect Ohio's general credit standing, sound structural provisions, the broad state purposes of financed projects, and constitutional authorization for these types of bonds. Debt levels are moderate, with tax-supported debt equaling 2.9% of personal income and amortizing rapidly. Ohio general obligations are rated 'AA ' by Fitch.

While Ohio has experienced significant economic and budgetary pressures, repeated lowering of revenue estimates has been matched with commensurate balancing actions, including substantial depletion of reserves. Ohio's manufacturing dependence creates vulnerability to recession, as has been evident in recent years. Manufacturing amounts to 15.7% of overall employment. Between 2000 and 2003, employment in Ohio dropped 4.2%, or triple the national rate of job loss. The rate of job loss slowed in 2003, but manufacturing employment still fell 3.4% between March 2003 and March 2004. Per capita income in Ohio is 95% of the U.S., ranking the state 25th. Between the third quarters of 2002 and 2003, personal income grew 2.9%, versus 3.6% for the nation as a whole.

The most recent lowering of revenue estimates occurred in March 2004, reflecting in large part weakness in the quarterly estimated component of the personal income tax. March 2004 receipts exceeded the lowered estimates due to strength in both income and sales taxes. Lower than expected spending and additional cuts ordered by the governor are projected to prevent substantial depletion of remaining fund balances, leaving a $128.6 million fund balance equal to approximately 0.5% of revenues and a $181 million budget stabilization balance at the end of fiscal 2004. The sales tax was temporarily raised by 1% to balance the budget for the fiscal 2004 and fiscal 2005 biennium. An initiative to eliminate the temporary increase poses a concern, but its prospects for passage are very uncertain.