2009-11-10 22:46:01 -

In the course of routine surveillance, Fitch Ratings affirms Ocala, Florida's approximately $43.2 million in outstanding capital improvement revenue certificates at 'AA-'. The Outlook is Stable.

The 'AA-' rating reflects the strong debt service coverage provided by a diverse mix of pledged revenues, adequate legal provisions, and the general credit characteristics of the city, including low debt levels and sound financial

operations characterized by multiple years of operating surpluses and robust reserves. Also factored into the rating is the city's financial support from the utility system and a historically limited economy. Economic indicators have weakened in the current national economic downturn with increasing unemployment and foreclosure rates as well as the closure of a major employer. The key rating driver is the city's ability to maintain ample reserve levels and conservative budgeting practices to assure financial cushion in this pressured operating environment.

The bonds are secured by a first-lien on the 1/2 cent sales tax, franchise fees, communication services taxes (CST), occupational license taxes, the guaranteed entitlement portion of state revenue sharing funds, mobile home license fees and court fines and forfeitures. On a pro-forma basis, audited fiscal 2008 results provided 3.0 times (X) coverage of actual debt service and 2.4x maximum annual debt service (MADS). Debt service is ascending until MADS occurs in fiscal 2018.
Projected fiscal 2009 results, based on 11 months of revenue collections, show a slight increase in total revenues raising coverage to a strong 3.1x annual debt service and 2.8x MADS. Legal provisions are adequate requiring 1.3x MADS coverage to issue additional debt although coverage is expected to remain well above this as excess revenues are used to support general government operations.

Ocala is located in central Florida, approximately 90 miles northeast of Tampa. The city's historically limited economy has begun to diversify with educational and business services adding to the city's concentration in retail trade. Marion County's horse breeding industry, which competes nationally as a major center for thoroughbred horse racers, also benefits the city's local economy. The national downturn in the economy has had a significant impact on the city. Taylor, Bean & Whitaker, a mortgage company with headquarters located in Ocala and a major city employer, closed this summer. The unemployment rate has increased to a high 13.2% in September 2009 from 7.9% a year prior.

Foreclosure rates remain on par with the state but well above national averages.

Financial operations for the city have remained strong despite current economic pressures. The fiscal 2008 unreserved fund balance was substantial at 37.8% of spending, supported by the annual transfer from the electric utility totaling 17% of revenues. Unaudited fiscal 2009 results indicate a small surplus. The fiscal 2010 budget is balanced with no use of reserves. A relatively moderate 8.6% decrease in assessed value was offset by an increase in the millage rate. General fund expenditures were reduced 4.8% through a detailed financial plan, including a vehicle reduction program, department and division reorganizations and layoffs.

Overall debt levels are low at $1,553 per capita and 1.9% of assessed value. Amortization is average. No additional debt is currently planned while the city's capital needs are projected to remain manageable.

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Fitch RatingsRachel A. Barkley, 212-908-0514, New YorkKelly
McGary, 813-224-0492, TampaorMedia Relations:Cindy
Stoller, 212-908-0526, New YorkEmail: cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com