Fitch Rates Norfolk, Virginia's $153.2MM GOs 'AA'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has assigned an 'AA' rating to Norfolk, Virginia's
(the city) $153.2 million general obligation (GO) capital improvement
bonds, series 2008C. The bonds are scheduled for bids on June 17.
Fitch has also affirmed the 'AA' rating on the city's outstanding $536
million of GO bonds. The Rating Outlook is Stable. Bond proceeds will
fund general government capital projects.

The 'AA' rating reflects the city's sound financial management,
including comprehensive fiscal planning and monitoring, and a moderate
debt burden with rapid amortization, along with the city's military
dominance and subsequent below average a wealth levels. The city's
solid general fund reserves and improving income indicators are also
rating factors. Additionally, the rating incorporates the city's
continued efforts to diversify the economic base beyond the
traditional military and tourism industries.

The city of Norfolk, with an estimated 2007 population of
approximately 236,000, is located in the Hampton Roads region of
Virginia, adjacent to the Atlantic Ocean. Home to the world's largest
naval complex, the city 's economic activity and employment base are
concentrated in defense-related activities, although over the past
several years, significant retail, commercial, and tourism activity
has enhanced the city's economic diversity. The sizeable military
presence results in wealth levels below state and national levels,
although between 2002 and 2006 per capita personal income in the city
grew at a faster rate than both the state and the nation. While
unemployment rates in the city have historically been above those of
the state, they have consistently been below the national averages.
However, the city's unemployment rate of 5.2% for March 2008 was above
both the state and the national averages of 3.9% and 5.1%,
respectively.

Financial operations are sound. The unreserved general fund
balance at the close of fiscal 2007 was $71 million, or 12.7% of
spending; the city has structurally balanced its budget for the past
two fiscal years after funding recurring expenses with surpluses
earlier in the decade. Included in the unreserved fund balance is a
fully funded rainy day reserve, which meets the city's goal of 5% of
the operating budget. Year-to-date performance for fiscal 2008 is
positive relative to the budget. The city expects to end fiscal 2008
with a small general fund surplus. The fiscal 2009 approved budget
represents a modest 4% increase from the adopted budget for fiscal
2008, as the city anticipates slower growth in the tax base due to the
softening housing market and the escalation of fuel and energy costs.

Debt levels are moderate, with overall debt equal to about 4% of
assessed value and roughly $3,000 per capita. Amortization of
outstanding debt is rapid with over 60% of principal retiring within
ten years. The capital improvement plan (CIP) for fiscals 2009-2013
totals approximately $633 million and is focused primarily on utility
and general governmental improvements. The capital budget for fiscal
2009 equals approximately 30% of the plan, or about $176 million, and
is expected to be funded with a combination of bonds (90%) and cash
(10%).

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, 212-908-9181
Barbara Ruth Rosenberg, 212-908-0731
or
Media Relations:
Christopher Kimble, 212-908-0226

Copyright Business Wire 2008