2008-05-08 23:38:11 -

- Fitch Ratings assigns an 'AA' rating to the City of High Point, North Carolina's (the city) estimated $13.1 million general obligation (GO) bonds, series 2008. The bonds are scheduled for bids on May 20 and will mature serially from March 1, 2010-2029. Bond proceeds will fund general government capital projects. The city also anticipates selling $40.5 million of combined

enterprise system revenue bonds at the beginning of June to which Fitch will assign a long-term rating nearer to the sale date. In addition, Fitch affirms the rating on the city's outstanding $128 million of GO bonds at 'AA'. The Rating Outlook on all bonds is Stable.

The 'AA' rating on the GO bonds is based on the city's sound financial position and ample reserve levels, as well as the low to moderate debt burden with above average principal amortization. The rating also incorporates the fact that High Point's economy, though diversifying, remains fairly narrow and reliant on the furniture and textile industries, including the semi-annual High Point Market.

High Point is located in the fast growing Piedmont Triad region of North Carolina, which also includes the cities of Greensboro and Winston-Salem; the GO bonds of both cities are rated 'AAA'; Outlook Stable by Fitch. The population of High Point grew a rapid 24% in the 1990s and is estimated to have grown another 14% since the 2000 census. Despite the local economy's reliance on the furniture and textile industries, the city's largest employers are relatively diverse. In addition to the economic activity associated with furniture manufacturing, distribution, and wholesaling, the High Point Market (formerly known as the International Home Furnishings Market) draws more than 150,000 people to the city for trade shows held in April and October of each year. Adding depth to the employment base are drug discovery company TransTech Pharma and health insurance company Aetna. TransTech Pharma announced in December 2007 the addition of 205 new jobs over the next five years, while Aetna announced plans in April 2008 to add 300 additional jobs in their High Point offices. Continued expansion by Dell Inc. and Federal Express near the Piedmont Triad International Airport, just outside the city limits, will also have a positive impact on labor force and employment growth and are expected to stimulate additional commercial and industrial development. Income levels in the city are slightly below average when compared to county, state, and national statistics. Per capita money income (2006) was 92%, 99%, and 90% of the county, state, and national averages, respectively.

Solid financial management is reflected in sound fiscal policies, stable operating results, and high reserve levels. The reserve policy adopted by city council requires an undesignated general fund balance equal to at least 10% of expenditures. In practice, reserve levels have been well above the policy floor. Fiscal 2007 ended with a general fund surplus of approximately $1.3 million, resulting in an unreserved fund balance of $18.6 million or roughly 19% of spending. The city maintains an additional cushion of over $3 million in state statute reserves required for receivables, which are available for operations if needed. In fiscal 2007, the total derived from the unreserved general fund balance and reserves required by state statute was almost $22 million, or a high 22% of spending. Year-to-date performance for fiscal 2008 is positive relative to the budget, and the city expects to end fiscal 2008 with a small general fund surplus.

The city's capital improvement plan through fiscal 2012 includes $359 million of projects and is fully funded with a combination of cash, GO and revenue bonds, and various enterprise revenues. Voters approved a $73 million GO bond referendum in November 2004, and the series 2008 GO bonds represent the fourth tranche of debt under the authorization. The city plans to issue additional bonds under the authorization in fiscal 2010, and does not plan to return to voters with another referendum until the projects authorized by the 2004 referendum are complete. Direct debt levels are low at 1% of assessed value and less than $1,000 per capita. Overall debt levels, including the overlapping debt of Guilford County, are more moderate at approximately 2% of assessed value and $2,200 per capita. Guilford County is rated 'AA+' with a Stable Outlook by Fitch.

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, New York
Alexandra Knight, +1-212-908-9181
Barbara Ruth Rosenberg, +1-212-908-0731
Cindy Stoller, +1-212-908-0526 (Media Relations)