2008-08-28 23:28:02 -

- In the course of routine surveillance, Fitch affirms the 'A' rating on Brenham, Texas's (the city) outstanding $8.2 million general obligation (GO) and $31.0 million Certificates of Obligation (CO). The Rating Outlook is revised to Positive from Stable.

The 'A' rating reflects the city's solid financial performance supported by a willingness to raise recurring revenues, moderate but growing

debt ratios, below average income levels and somewhat concentrated tax base. The city's revenue composition is diverse but susceptible to economic fluctuations given that sales and franchise taxes represent a combined 63% of general fund revenues in fiscal 2007. The Positive Rating Outlook reflects a significant improvement in general fund performance for fiscal 2007 and a demonstrated shift towards strong financial management practices including the preparation of multi-year projections. If maintained, enhanced financial flexibility and reporting tools could serve to further mitigate the aforementioned credit concerns and have positive rating implications.

The city's fiscal 2007 unreserved general fund balance is $2.25 million or 23% of total expenditures after four years of strong operating income and up from a low 5% in fiscal 2004. Property tax revenues equaled 24% of general fund revenue in 2007 and the tax base is somewhat concentrated with the top 10 taxpayers comprising 17% of total taxable assessed value (TAV). The taxpayer and employment concentration is somewhat mitigated by the diversity of the employers and their long presence in the city. The city's overall debt levels have increased to $3,809 per capita or 4.37% of TAV from $1,682 or 3.7% in 2002 due primarily to a $9 million issuance in 2006 for a new police station. Debt service is a high 20% of expenditures and like all Texas municipalities is supported by a dedicated tax. The city does anticipate issuing more debt in the near term but Fitch expects the debt burden to remain manageable.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this underlying rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework').

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site

Fitch Ratings
Drake Richey, 212-908-0325 (New York)
Rebecca Moses, 512-215-3739 (Austin)
Media Relations:
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