2008-06-12 23:36:35 -

- Fitch Ratings assigns an 'AA+' rating to East Lansing, Michigan's $1,135,000 general obligation (GO) limited tax bonds, consisting of:

--$800,000 series 2008A;

--$335,000 series 2008B (Taxable).

The bonds are scheduled to sell via negotiation on or about June 17, 2008 and are secured by a GO pledge of the city, payable from a limited ad valorem

tax levied on all taxable property within the city. The bond proceeds will finance a portion of the city capital improvement plan. In addition, Fitch affirms its 'AA+' rating on the city's approximately $77.1 million of outstanding GO debt. The Rating Outlook is Stable.

The city of East Lansing is located adjacent to the state capital, Lansing, in the central portion of Michigan's Lower Peninsula. The state capital complex and Michigan State University (MSU) provide the backbone for a diversified regional economy. Strong growth in health care, insurance, engineering, and other business services over the past decade served to reduce the region's dependence on manufacturing. Despite slower growth in fiscal 2007 and 2008, the city's property tax base increased at a 5% average annual rate since 1993. While residential building permit activity declined in 2008 compared to the prior year, the city's condominium market remains healthy and the commercial segment of the tax base continues to remain stable.

Anchored by employment at MSU and state government, the area economy's dependence on durable manufacturing has declined in recent years. Durable manufacturing employment represented 7.4% of total nonfarm jobs in the area in 2007, compared to 10% in 1998. The city's unemployment rate of 6.1% in April 2008 remains above the national rate of 5% in the same period.

The stability of the local economy and the city's focus on controlling operating costs results in consistent general fund performance, as undesignated reserves have exceeded 7% of spending since fiscal 2000 (June 30 year-end). In 2007, the city's undesignated balance equaled $2.6 million or 7.3% of spending, compared with $2.9 million (9%) in fiscal 2006. While the general fund produced a small surplus, elevated capital outlays through the general fund diminished the balances relative to spending. Nonetheless, the city has reduced its borrowing needs by financing several larger capital projects with operating funds. The city's fiscal 2008 results are expected to be breakeven.

The city's five-year forecast anticipates continued increases in reserve levels and the recent adoption of financial policies and controls should guide financial performance. Direct debt equals $902 per capita and 1.9% of market values, while overall debt, primarily reflecting East Lansing Schools, equals a moderate $2,449 per capita and 5.2% of full market valuation.

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, Chicago
A. Paul Sadlowski, 312-368-3198
Melanie A.J. Shaker, 312-368-3143
or
Media Relations:
Christopher Kimble, 212-908-0226, New York