2008-07-24 01:04:05 -

- Fitch Ratings has assigned an 'AA+' to the Town of Normal, Illinois' $10 million general obligation (GO) bonds, series 2008. The bonds are scheduled for negotiated sale on or about Aug. 4, 2008. An unlimited GO pledge secures the bonds. Proceeds will finance capital improvements in the town's uptown area. Fitch also affirms the 'AA+' rating on about $64.4

million of outstanding GO debt. The Rating Outlook is Stable.

The 'AA+' rating is based on the town's stable economy, rigorous financial planning that supports consistently strong financial results, moderately high overall debt burden, and slow debt amortization. While the town of Normal is a home-rule municipality and not bound by tax rate limitations, its stable financial results reflect its diverse economy and conservative financial management. Having a strong university and financial services base has limited cyclical influences associated with the manufacturing sector and maintained below-average unemployment rates.

As part of the Bloomington-Normal metropolitan area in central Illinois, the town has expanded at a steady pace through its strong university community (led by Illinois State University and Illinois Wesleyan University), Mitsubishi Motors North America, Inc.'s manufacturing division, BroMenn Healthcare, and State Farm Insurance Companies (headquartered in Bloomington). Although unemployment rates have increased in the past year, growing to 4.4% in May 2008 from 3.2% in May 2007, the town's rate remains below state and national figures of 6.4% and 4.8%, respectively, in the same month.

Sales taxes, utility taxes, property taxes and state-distributed income taxes are leading components of the town's diverse budgetary revenue stream. The limited dependence on property taxes allows the town to maintain tax rates that are among the lowest of central Illinois cities. In the last five years, the town's general fund has improved despite increased contributions for capital projects. Results from the fiscal year ended March 31, 2007 indicated an unreserved, undesignated general fund balance equal to $9.4 million, or 22% of spending, compared to fiscal 2001's $4.8 million (18.3%). Preliminary results for fiscal year 2008 indicate the town achieved a small general fund surplus. Though the town faces a slightly slowed rate of growth due to sales tax activity in fiscal year 2009 to date, Fitch expects fund balances will remain very strong.

The capital program is dedicated to the uptown renewal project, a major investment in the town's historic downtown area and the most significant capital project in the past decade. The plan consists of a hotel and conference center, multi-modal transportation center, and substantial roadway and infrastructure improvements to accommodate the new facilities. The largest component is the hotel's conference center and parking, currently under construction. Also incorporated in the plan is a parking garage to accommodate existing traffic and future needs; a mixed-use development which incorporates condos, office and retail space; and a multi-modal transportation center, most of which is to be funded using federal and state grants. While the hotel and conference center are currently under construction, the transportation center will not proceed until federal monies are in place and is likely to be the last significant portion of the project. The town anticipates issuing an additional $6 million in GO bonds in 2009 to complete the uptown plan.

The town's direct debt burden with this issue equals $1,439 on a per capita basis and 3.3% of property market values. Overlapping debt, consisting mostly of school district debt, raises the overall debt burden to a moderately high $3,357 per capita and 7.7% of property market values. Although the debt burden has increased in per capita terms, sales, hotel/motel, and tax increment revenues are the expected funding source for debt service.

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
A. Paul Sadlowski, +1-312-368-3198 (Chicago)
Melanie A.J. Shaker, +1-312-368-3143 (Chicago)
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)