2008-05-14 23:32:57 -

- Fitch Ratings assigns a rating of 'AAA/F1+' to the $170,605,000 City of Austin (Texas) water and wastewater system variable rate revenue refunding bonds series 2008. The long-term 'AAA' rating is based jointly on the long-term 'AA-' rating assigned by Fitch to the Austin, TX Combined Utility System (ACU and the support provided by an irrevocable, direct-pay letter of credit (LOC) issued by Dexia Credit Local, acting through its New York Branch (the bank), currently rated 'AA+/F1+, securing the bonds. The short-term 'F1+' rating is based solely on the LOC. The bank is obligated to make payments of principal, interest and purchase price when due. The rating on the bonds will expire upon the earliest of: May 15, 2011, the

expiration date of the LOC, unless extended; any prior termination of the LOC; or defeasance of the bonds. For more information on the underlying credit, please refer to the research report published on April 29, 2008 available on the Fitch web site www.fitchratings.com.

The long-term 'AAA' rating is based on Fitch's methodology which considers the joint probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation; in this instance there is a low degree of correlation. Fitch has determined a low degree of correlation which results in a rating of 'AAA'. If either the ACU or the bank were downgraded to 'A-' or lower, the joint probability could no longer be applied and the long-term rating would then reflect the higher of the two ratings.

The LOC provides full coverage of principal plus an amount equal to 35 days of interest computed at a maximum rate of 12%, based on a year of 365 days, and purchase price for tendered bonds. The series 2008 bonds are expected to be available for delivery on or about May 15, 2008. The remarketing agent for the bonds is Goldman Sachs.

The bonds will bear interest in a weekly rate mode, but may be converted to a daily, bond interest term or long-term interest rate. While bonds bear interest in the weekly rate mode, interest payments are paid on the fifteenth day of each month, commencing June 15, 2008, and bondholders have the option to tender their bonds on any business day, with the requisite prior notice. The bonds are subject to mandatory tender on conversion of the interest rate mode, and upon the expiration, termination or substitution of the LOC or upon the occurrence of an event of default under the LOC Reimbursement Agreement directing the Trustee to cause a mandatory tender of the Bonds. Optional and mandatory redemption provisions also apply to the bonds.

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
Marina Kaganovskaya, +1-212-908-0803
(for information on the Series 2008C bonds)
Yvette Dennis, +1-212-908-0668
(for information on the ACU)
Cindy Stoller, +1-212-908-0526
(Media Relations)